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Good question. I phoned my CC company to get an answer in case my pizza place ever asks for it.
They DO NOT NEED this information to process your purchase. They MAY be doing it to protect themselves from cloned cards. That's the only LEGAL reason he could think of think of that they might be asking for it.
When asked whether or not HE as a CC employee would give it out, he said no.
He said this would be "close to" giving out your pin #.
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