Should You Give Your ZIP?

Benefits for merchants

But retailers also may have another incentive — lower fees from card issuers if they gather customers' ZIP codes.

Jen Schow, a communications consultant at card issuer Wells Fargo, says that if you give your code and it matches what the credit card company has on file, this helps establish that the card isn't being used by a crook.

The practice "protects both merchants and consumers from cards being used fraudulently," Schow says. And that higher security means the credit card company is willing to accept a lower transaction fee.

Kim Larson, owner of BoulderFields boutique in Lafayette, Colo., says she was charged "insane fees" the first month she was in business because she didn't gather customers' ZIP codes.

"I was told by Wells Fargo that I would be hit with less fees if I entered the ZIP code of the card being used," Says Larson.

Just say no, except at the pump

Still, being asked for your code rubs many shoppers the wrong way, and not a few have devised evasive responses. "I will give my work ZIP code, or I'll just use 90210," from the title of the long-running TV show, says Diana Crabb of Crystal Lake, Ill. "I don't like being asked for my ZIP code."

If you're buying something in a store, Horton says, you can simply refuse to provide the digits and the retailer must still process the transaction.

But that won't work at a gas pump. There's no one there to check the signature on the back of the credit card. Requiring the code is a protection against fraud — if you give no code, or the wrong one, your purchase will be declined. (The California Supreme Court decision allowed gas pumps to continue to collect the codes.)

As Horton describes the system, consumers need not worry that the gas station company will use the number to run down your address.

"Your ZIP code goes directly to a bank to verify the card number," he says. "It's not entered or stored in a database."

Also of interest: Pay with cash and spend less. >>

Gina Roberts-Grey is a freelance journalist who writes about consumer and health issues.