Which fee is incurred when using a cardholder's address to verify transaction legitimacy?

The fee incurred when using a cardholder's address to verify transaction legitimacy is the Address Verification Service (AVS) fee. AVS is a tool used by merchants and card processors to confirm that the billing address provided by the cardholder matches the address on file with the card issuer. This verification process helps to reduce fraud and chargebacks by ensuring that the person making the purchase is indeed the cardholder.

When a transaction is processed and the merchant opts to use AVS, a fee may be applied for this service. This fee is associated with the additional steps taken to ensure the transaction's legitimacy, reflecting the increased scrutiny and efforts required in the transaction processing phase. AVS fees can vary depending on the payment processor and the number of transactions verified using this service.

Understanding this concept is crucial for merchants, as implementing AVS can not only enhance security but also potentially lead to lower chargeback rates, contributing to overall cost savings.