An article by Adam Tanner at Forbes says you should never give your ZIP code to stores. Never.
Everywhere you go, stores, gas stations, entertainment venues and other places ask for a ZIP code to finish a credit card transaction. With the exception of maybe American Express (which uses it to prevent fraud, apparently) the code is not needed to buy things.
Sean Boulger at scambook.com explains why companies want your ZIP code: "Companies collect your ZIP code because it can be used to get your full address when combined with the first and last names that are on your credit card. With this information, the company can send you direct marketing catalogues. They can also sell your information to third-parties, who will then re-sell your information to whomever the like. It's not a very pretty picture."
"In one of their brochures," Tanner at Forbes says, "direct marketing services company Harte-Hanks describes the GeoCapture service they offer retail businesses as follows: 'Users simply capture name from the credit card swipe and request a customer's ZIP code during the transaction. GeoCapture matches the collected information to a comprehensive consumer database to return an address.' In a promotional brochure, they claim accuracy rates as high as 100 percent."
Fair Isaac Corporation (the FICO credit scores company) offers a similar service.
"The result can be unwanted catalogs and other junk mail," says Ann Carrns at The New York Times. "(To get a simple idea of the cumulative impact of each tidbit of information, try searching for your name alone on Google search, and then search again using your name and ZIP code, and see how much more data comes back. If you have an uncommon name — as I do — it's eye opening.)"
As Melanie Pinola at Lifehacker says, "Not all retailers use your ZIP code to find out your exact address or contact information, but why give them that key?"
Sean Boulger at scambook.com says, "Some stores may get pushy, but you're not going to be denied a purchase anytime soon because you refused to give out your ZIP code."
According to the Free Enterprise blog at findlaw.com, in some states, like Massachusetts, it is illegal to ask for the ZIP code. "Because the state (Massachusetts) prohibits the collection of 'personal identification information' by retailers for marketing purposes, the court held. The ruling turned on whether a ZIP code is a form of 'personal identification information.' The court found that it was, because it provides enough information to identify a customer's address or phone number through the use of a 'reverse phone book.'"
Carrns at The New York Times says stores may still ask (presumably in all states) for ZIP codes if it actually is needed to complete a transaction. For example, if your card won't swipe properly, the store may need the ZIP to verify the card. American Express also has a system that requires the ZIP to verify cards to prevent fraud.
There is another way to bypass giving out a ZIP code. Use cash.