E-file your Income Tax Returns for FREE

E-file your Income Tax Returns for FREE

Zero-Floor Limit

Reviewed by Vishnu | Updated on Apr 15, 2021


What is Zero Floor Limit?

Zero floor limit is the term used to indicate the authorisation of credit card and debit card transactions. Floor limit is defined as the specific limit on transactions, beyond which requires authorisation. All transactions below the maximum floor limit can be automatically processed by the merchant instantly.

However, if the specified limit is zero, i.e. if the credit card or debit card has a zero-floor limit, all transactions irrespective of the size will have to be authorised. The credit or debit card issuer provides the cardholder with an electronic authorisation.

Understanding Zero-Floor Limit

The zero-floor limit plays a crucial role as online merchants will not have physical access to the customers’ credit or debit card. The floor limit is always set to zero in the case of contactless transactions, i.e. when the merchant does not interact with the cardholder directly.

In such cases where there is a zero-floor limit, the transactions require retail authorisation to verify the merchant’s transaction against the credit or debit card’s overdue balance.

Though transactions requiring retail authorisation do involve additional processes, this will ensure that the customers’ cards are not being used for fraudulent purposes. In case the retailers process the transaction without authorisation despite the zero-floor limit, chances are likely for the transaction to be reversed or declined later, which could attract additional charges as penalty depending on the card-issuing company’s assessment of the transaction.

Benefits of Zero-Floor Limit

Despite the additional steps involved in authorisation of contactless or online transactions, credit card companies are keen on improving the authorisation process. This is due to the fraudulent activities that can occur through the customers’ lost credit or debit cards. With the help of a zero-floor limit on all transactions, credit card companies have been able to prevent fraudulent and suspicious activities in the case of online transactions.

Related Terms

Recent Terms