The Address Verification System (AVS) is an advanced level of credit card security that is now used to help guard against credit card fraud. When a card is sent to the bank for processing the house number portion of the address and postal code entered with the order must match that of the cardholder on file. This is another way to ensure that the owner of the card is in fact the one using it. If the address does not match then the transaction is declined and sent back to merchant. At that point the merchant has to decide whether to process the transaction anyway or reject it. If the merchant chooses to process the card (even though it’s address is invalid) they pay a higher transaction fee. This is called an unqualified transaction. A transaction with an address that verifies is said to be qualified and the merchant is charged their normal transaction fee.

Why do we need AVS?

The answer is what you are using right now – The Internet.
Since E-Commerce took off in the late 1990’s credit card fraud has been on the rise. Fraud was responsible for 700 million dollars in online sales losses in 2001. (Sources: Credit Union National Association and CNN Sci-Tech) The reasons range from hacking to the ease of anonymity when online. Many companies were getting burned time and again with stolen credit cards. The Address Verification System has cut down on fraud as it was intended to. As stated before, the AVS system (in most cases) does not block the card from being processed. It first gives a warning to the merchant to which the merchant must decide whether or not to proceed.

Should I use AVS on my web site?

It’s difficult not to use it but using it could also cost you business. Like so many other decisions you will need to make about your ventures in Internet land the size of your business and who your customers are should be the determining factors in using AVS.

See also…

Internet Law Forum

Online Purchases and Sales