What is a Floor Limit in the context of bank card transactions?

A Floor Limit refers to the maximum dollar amount that a merchant can process for a transaction without needing to obtain prior authorization from the bank or card issuer. When a transaction amount exceeds this limit, the merchant must request authorization to confirm that the cardholder has sufficient credit or funds available. This is crucial in managing risk, preventing fraud, and ensuring that the transaction is valid.

Merchants often rely on established floor limits to expedite transactions for amounts that are generally considered low-risk. By staying within the floor limit, merchants can complete sales more efficiently, as they can skip the time-consuming authorization process. This helps to enhance customer service by reducing wait times and improving transaction speed.

Understanding this concept is essential for anyone working with payment processing systems, as it impacts how transactions are managed and authorized in real-world scenarios. Other choices describe limits or fees that are not related to the processes of authorizing card transactions directly.