Address Verification

Identify Residential Delivery Address vs. Business Address

By 14 October 2021October 15th, 2021No Comments
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Identify Residential Address vs. Business (Commercial) Delivery Address

If you are someone who has had experience sending out direct mails for yourself or your company, then you might have noticed the shipping cost may vary sometimes. If you examine it further, you’ll notice that some addresses have a relatively higher shipping cost regardless of the size of the package or the distance it covers to reach the addressee. This is because the addresses are usually categorized into business (also called commercial) and residential addresses. Typically the shipping charge for delivering to residential addresses is higher than the commercial ones.

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If you use a private mail carrier, some of you may have had instances where you are forced to pay an extra address correction fee if you wrongly identified the address as a business or residential address. Although this may seem trivial for individuals who barely rely on postal mails as means of communication, the same can not be said for businesses who regularly send out bulk direct mails. Businesses that regularly send out direct mails, especially those that do it in bulk, must ensure that they avoid any confusion in the addresses.

This article discusses the difference between a residential and commercial address, why residential address delivery sometimes costs more than commercial deliveries, and why it is important for businesses to identify residential and business addresses. Furthermore, we also take a look into RDI or Residential Delivery Indicator and its role in helping you identify addresses as business or residential addresses. We also explain how you can optimize your direct mail campaigns through address type identification and more.

Residential vs Business Address

Contrary to popular belief, shipping is not nearly as simple or straightforward as you might think it is. In fact, even the definition or differentiation of residential and business addresses may vary from one mail carrier to the other. That being said, an address is considered as a residential one if it is a house, apartment, and other dwelling places where people live on the premise. Usually, any business operating from such a postal address is still considered to be a residential one.

Similarly, commercial addresses are those that belong in commercial sites defined by your mail or freight carrier, and these addresses are usually zoned as commercial real estate. Private mail carriers usually charge a standard shipping fee for deliveries made to a commercial or business address and charge a different shipping charge for deliveries made to residential addresses. More often than not, the shipping charge for delivering to residential addresses is higher than that to a commercial or business address.

The problem arises when businesses that regularly use direct mails have no means of identifying whether a given address is a residential or business one. The catch is that your business may end up paying the price for its inability to identify whether an address is residential or commercial. Given that businesses deal with a considerably large number of direct mails, this price you end up paying may add up to a fairly big sum of money. So if yours is a business that regularly sends out bulk direct mails, it is best if you can make use of an advanced address verification system like PostGrid.

With an advanced system like PostGrid, businesses get the ultimate advantage of verifying whether an address is real and deliverable. What is more enticing about using a system like PostGrid is that businesses can run bulk verification with ease within mere seconds. All you need is a simple CSV file for the verification process. PostGrid returns the verified address in a CSV file, which also comes with a field inside it that provides you with the “Firm Name” of all the contacts in your address database if it is available.

Why are Residential Deliveries More Costly?

We know what a residential and commercial address is, and we also know that their exact definition can vary depending on the mail carrier you are using. But, that still doesn’t explain why the deliveries made to a residential address have a higher shipping cost than that to a commercial or business address.

Most private mail carriers choose to charge a higher shipping rate for residential address deliveries because their primary target is always commercial businesses. And when they do make deliveries to a residential address, the residential addresses are often located outside their normal routes.

Additionally, the residential addresses are spread out, which means that they have a higher overhead cost. You also need to consider the additional loss incurring on the postal mail carrier, which includes time, gas, and in the long run, the wear and tear on the vehicles that fulfill the delivery. Furthermore, last-minute deliveries are the most expensive aspect when it comes to small parcel costs.

Since the commercial addresses are typically from high-density areas, it allows the delivery person to bundle together numerous deliveries that are to be made in a specific yet small geographic area.

This means that the mail carrier has to take the extra effort and literally go out of their way to deliver a package to a residential address. Although some are of the opinion that the higher shipping cost is to discourage residential address deliveries, it is understandable why the mail carriers would ask you for a higher fee considering the extra work they have to put in.

The only plausible solution once you have understood the residential vs business address argument is to determine which of the addresses in your database are residential ones and which of them are commercial ones. This is where RDI or Residential Delivery Indicator comes into the picture.

What is RDI?

RDI, short for “Residential Delivery Indicator,” helps you to identify whether an address is a residential one or a commercial one. The USPS keeps track of pretty much everything, and the RDI is a result of this as it was created because the USPS wanted to track addresses that are registered explicitly for commercial purposes. The USPS has even gone so far as to enable authorized programs and software to access its official database, mostly for the purpose of verification.

The USPS already knows which of the addresses are residential ones and which of them are commercial ones thanks to their authoritative database of the addresses in the US. USPS uses the Residential Delivery Indicator or RDI as a means to indicate whether an address is residential and commercial. USPS provides you with this data via RDI to promote their own business because, unlike private mail carriers, the USPS does not charge different shipping rates for commercial and residential addresses.

The USPS even has a certifying authority called CASS or Coding Accuracy Support System that certifies address verification tools. CASS certifies whether a program/software can access and validate addresses by comparing their data against USPS’s official address database. PostGrid is one of the most popular CASS-certified address verification software widely preferred by businesses, especially the ones that require quick and easy bulk verification of addresses.

Residential Address Classification by the USPS and Private Carriers

As we briefly mentioned before, the definition of a residential address can change from one mail carrier to another. Both private mail carriers and the USPS classify the addresses they deliver to as commercial and residential addresses, and the condition for this may be different for every carrier. This gives rise to a new challenge, the addresses classified as residential by the USPS may not necessarily be classified as residential by the private mail carrier. This means an address that is classified as commercial by the USPS may very well be classified as residential by a private mail carrier.

In most cases, private carriers like FedEx and UPS largely depend on location for classifying their addresses as “commercial” or “residential” and ignore the actual purpose for which the address or property is being used. When it comes to the classification of locations in the US, the cities are divided up into different “zones.” These zones consist of residential zones, industrial zones, and commercial zones, and they restrict what kind of buildings can be built there, which in turn results in similar buildings (in terms of purpose) being clustered in their respective zones.

This means that residential buildings are more than likely to be built in a residential zone and commercial buildings to be built in a commercial zone. To put it in a more comprehensible way, the private carriers consider every address in a residential zone to be a residential address. Even if the address is actually used by a business, you’d still end up paying the extra address correction fee if you are sending a postal mail to such an address.

Similarly, all other addresses outside of residential zones are considered “commercial” by the private carriers, and they enjoy ower shipping rates even if the address is in fact used as a residence. So, suppose a friend of yours decided to make his/her long-time dream of starting a business into a reality by setting up a shop in his/her home garage. And you want to congratulate him/her on the new accomplishment. You’d still have to pay the high residential shipping cost to the private mail carrier because, according to them, the address is still a residential one as it is still standing in a residential zone.

On the flip side, if the mail carrier of your choice is the USPS, then you can have the letter delivered to your friend at the same shipping rate as any other mail because there is no difference in the USPS shipping costs. The USPS RDI further tells you what the use of the location is instead of telling you which zone the address is in.

In other words, if you use RDI for sending direct mails to your friend who just converted his/her garage into a mini shop, then the USPS will tell you that the mail you are sending is going to a business location. This is standard even if the address is classified as residential according to the city zone it is in at the moment.

Benefits of Identifying Residential vs. Business Addresses Using RDI

There are many benefits of identifying residential and business addresses for businesses that regularly run direct mail campaigns or just send out direct mail to their customers for various purposes. Below we discuss some of the most important benefits you can harness by identifying residential and business addresses in your address database.

Considerably Reduce Return Mails

With the help of RDI and a CASS-certified address verification software like PostGrid, businesses can ensure that they have accurate and reliable information about their customers’ addresses. This will not only help you deliver direct mails to the target audience without fail but also considerably reduce return mails. By minimizing the return mails, you can save valuable resources, including time, materials, and working hours spent on direct mail efforts by your company. Furthermore, the significant reduction in return mail is also proof that the direct mails are reaching the target audience.

Enhance Your Customer Relationship Management or CRM

You can greatly enhance the capabilities of your CRM or Customer Relationship Management with the help of a CASS-certified address verification tool. This is accomplished by ensuring the maximum penetration of your company’s marketing efforts thanks to RDI and CASS-certified address verification capabilities. Additionally, when coupled with a good CRM system, the CASS-certified software can provide your business with valuable insights and tracking capabilities that can help you streamline your direct mail efforts and make the most out of them.

Identify Patterns in Shipping

With a little help from Residential Delivery Indicator (RDI), you can effectively start to identify certain patterns in shipping. This could be identifying the commercial addresses in a residential area or vice versa and then analyzing those addresses to come up with a new and optimized route for delivery. Furthermore, you can use the data to map out these and even customize the existing ones for better performance of your business’s direct mail campaigns.


Businesses that regularly send out direct mails to their customers often have to deal with residential and commercial addresses. However, many companies are not fully aware of what this means or how it can affect the overall direct mail campaigns conducted by them. Private mail carriers often charge a higher shipping cost for deliveries made to residential addresses because of the extra resources it requires. However, on the other hand, the USPS does not charge you extra for delivering to residential addresses. This makes USPS the preferred choice when it comes to direct mail campaigns for many companies out there.

When dealing with the residential vs. business address argument, the Residential Delivery Indicator or RDI takes center stage. RDI allows you to find out whether an address or property is actually used as a business or residence property regardless of which city zone they are located in. This can be extremely valuable for a marketer and can prove pivotal in optimizing the direct mail campaigns of your company. That being said, the easiest solution would be to employ a CASS-certified advanced address verification tool like PostGrid that can fully automate your direct mail efforts. Using a system like PostGrid can save you valuable time and effort that can now be invested in the more pressing tasks in your company.

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