Living with credit, Protecting yourself, Shopping

ZIP codes prevent pay-at-the-pump fraud

Sienna Kossman

Ever wonder why you have to enter your ZIP code to pay for gas at the pump with your credit card? After all, it’s not like you’ve been prompted to type in those digits when you swipe your card elsewhere — you usually just need to sign.

It may seem like a random request, but there’s a purpose and it’s for your own good.

ZIP codes are requested by merchants to either gather marketing information or act as a level of fraud prevention. When you are paying at the gas pump with your credit card, gas stations are asking because of the latter.

ZIP codes prevent pay-at-the-pump fraud

You may not think about it much, but you already routinely verify your method of payment. When you pay with debit, you have to enter your PIN to approve the transaction. If you are paying with a credit card at a register, you’re typically prompted to sign for the sale and/or show your card and valid ID to the cashier for verification.

But, if you pay for gas at the pump with a credit card, you don’t have those verification options. There’s no pad to sign, no clerk to look at your card.

Enter the ZIP code.

Credit card readers at payment-automated gas pumps use something called the Address Verification System as a safe guard against fraud. AVS prompts customers to enter their ZIP codes which are cross-referenced with the billing addresses tied to the cards being used, according to payment system provider BluePay. If the entered ZIP code doesn’t match the one on record, the transaction will be canceled.

This makes a gas pump request for a ZIP code different from a sales associate asking for your digits before you pay for a new pair of jeans. In that situation, you can give a fake five-digit number or just refuse to respond and the transaction goes through because the store just covets marketing information not essential to the transaction. In a pay-at-the pump situation, neither of these tactics work.

You have to give the right number because entering your correct ZIP at the pump verifies your identity, just as a PIN confirms you are the one authorizing your debit card’s transaction. This way, someone using a stolen credit card can’t just swipe the card and go, according to Jeff Lenard, the National Association of Convenience Stores vice president for industry advocacy.

“Someone with a stolen card would be less likely to correctly enter the ZIP,” he told Forbes. “Thieves often test cards to see if they are still ‘live’ at places where they don’t have to engage in a face-to-face transaction, such as at the gas pump. This is done so that there is not a confrontation where they could have the card confiscated.”

While pay-at-the-pump card verification isn’t required by law, it’s widely supported as a useful fraud-deterrence technique, even by California, which has strict laws retailer point-of-sale personal information collection.

California’s Song-Beverly Credit Card Act of 1971 made it illegal for retailers to ask for and retain cardholder’s personal information at the point of a sale. This law has since added restrictions on email and ZIP code collection, but makes an exception for gas stations following a 2011 analysis of the older ruling.

However, as data breaches continue to cause headaches and many are questioning how businesses collect and store consumer data overall, there is concern about what happens to the ZIP code information collected at gas pumps.

When in-store retailers ask for your ZIP code at the point of sale and you give it to them, not only do they better understand the location of their consumer base but they also then have enough details about you to attain your address for marketing purposes. The trouble is that once they get that information, it’s hard to know where they will stop, according to Evan Hendricks, publisher of “Privacy Times.”

However, you don’t need to worry that punching in your digits while topping off your tank opens the door to more unwanted invasions of privacy. According to Lenard, the information gathered in these situations is not used for marketing and even though it is sent to the credit card processor and issuing brand, the data are used only to facilitate the transactions. Energy companies such as ExxonMobil and Phillips 66 have also issued assurances the numbers are not kept after the information is verified.

If you’re still not comfortable entering your ZIP code at the pump, you always have the option to go pay inside with the cashier’s oversight and verifying your transaction with a signature. Or you can use debit or digital-data-free cash.

But, until something else proves more effective in preventing pay-at-the-pump credit card fraud, ZIP code requests are here to stay, so brush up on your billing account information.

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