A credit card postal code is an additional form of security used to verify it is being used by the owner of the card or an authorized user. It is connected to the five digit zip code for the billing address of the cardholder. Most credit cards don’t require a PIN for a purchase, and that means it could be used by someone who obtained that information illegally.
With the request for a credit card postal code at checkout, for an online order, or even at the gas pump, it helps reduce the risk of fraud. The downfall of this is if the card is taken by someone who knows the cardholder they typically know their zip code. If a card is found, someone may decide to try the zip code for that location. It isn’t foolproof or as secure as a PIN, but it is a layer of security to help authorize transactions and reduce a card being used illegally.
What is a Postal Code?
Every location has a postal code. Most have a five digit based on small segments with an extended four digits that cover a wider area. Such information helps with mail sorting and with determining the postage due for packages. A large city may have several postal codes, each one identifying a segment of the overall city. It isn’t uncommon for a small town to have one zip code for all residents there.
What is a Postal Code on a Credit Card?
The ideal of a postal code on a credit card helps keep purchases secure. The person using the card must know the zip code the cardholder used for the billing address when they got the card. If they don’t have that information or it is entered incorrectly, the charge will not be authorized by the card issuer. Another form of payment will have to be used to complete the transaction.
If the transaction doesn’t go through, the customer may not realize they should have updated the information when they moved. With so many customers getting paperless statements for credit cards, they don’t always think about notifying the issuer when they move and their postal code changes.
If a potential charge is declined in person, politely tell the person if they moved recently the postal code is where they used to reside. They can try that information to get the charge approved. They should reach out to their card issuer as soon as they can to get the change updated.
While customers tend to be in a rush when they buy online, taking time to complete the billing and shipping details correctly is essential. Otherwise, the purchase may be declined because the postal code doesn’t match what is on file with the card issuer. Most have a place to check if the billing and shipping address are the same. If not, make sure the correct billing details are entered into the provided fields so the transaction can be approved.
This allows cardholders to buy items and send them to someone as a gift, to send merchandise to a business location, or even have it sent to a place where they will be on vacation. They don’t have to ship a purchase to their billing address, but they do have to provide their billing information so it can be matched in the system. Without that match, the transaction on that card isn’t going to be approved.
In Person Transactions
With more cards requiring a postal card on a credit card transaction, don’t be surprised if you are asked to provide it for in person transactions. When you pay using a machine, it may ask you to enter your zip code. Some consumers assume this is for data collection about where visitors are from. That may be part of it, but the main reason for it is security for credit card payments.
When a card is handed to an employee to complete the transaction, they may ask you to provide your zip code. It is safer to give them that information than a PIN number because a zip code is common knowledge. Often, a PIN can give someone with false pretenses a way to get into other information. Consumers often use the same PIN for more than one account, and that can lead to identity theft in the wrong hands.
You may hear the term AVS associated with postal codes for credit cards. AVS stands for Address Verification System. It means the same thing, but the terminology you hear used within a business or from a potential merchant account provider may vary. Always as for clarification of terms if you aren’t sure what they mean.
How does AVS Affect a Business?
Typically, a business taking additional steps for security with credit cards will pay lower processing fees. This helps them reduce overhead but still accept this form of payment. At the same time, it gives customers peace of mind. They realize the business is looking out for them and striving to keep their transactions secure. It only takes a few seconds in person to enter or give a zip code and proceed with the purchase. It doesn’t take long online either to verify the shipping and billing are the same or to enter the different information in the given fields for it.
When your merchant account provider requires a postal code for credit card payments, it will be part of the setup with your equipment. The AVS will be a required entry, it can’t be bypassed by the customer or an employee. It should never be a problem for a legitimate cardholder to know their zip code and get the charge authorized.
AVS can prevent fraudulent transactions and that saves your business money. When someone files a claim they didn’t make a charge with their card issuer, the funds may be given back to them while the issue is investigated. Requiring the postal code helps to confirm either the cardholder or someone known to them likely made that purchase versus it being a stolen card number used by a scammer.