What is the effect of adding a postal code to a payment transaction?

Adding a postal code to a payment transaction serves as an additional layer of verification that helps to validate the identity of the cardholder. When merchants require the postal code, they are employing Address Verification Service (AVS) checks, which can significantly enhance the likelihood of transaction authorization.

By confirming that the postal code provided matches the one associated with the credit card being used, merchants can reduce the risk of fraud. This validation can lead to higher authorization rates as payment processors view transactions with matching information as more legitimate. Consequently, this measure not only helps mitigate potential losses from fraudulent charges but also builds trust with payment processors, leading to more successful transaction approvals.

While the inclusion of a postal code can impact factors such as transaction fees or processing time, the primary effect revolves around improving the chances of authorization during payment processing, making it an important consideration for merchants looking to optimize their payment workflows.