Online payments for goods and services in the past have attracted excessive surcharges. For example, according to consumer advocacy group Choice, it was found that Qantas’ $7 card surcharge on a cheap flight was 348 per cent more than the likely cost of the transaction ($1.56), while Jetstar’s $8.50 surcharge accounted for a mark-up of 1187 per cent on the likely cost of 66 cents (Consumer Affairs Victoria). Of the 4Ps (marketing mix) of marketing, price is the variable that customers react to more than any other and in most cases it is that observable component of the product that decides if customers will or will not buy a product.

One of the most prominent practices of retailers is their method of deriving prices, and customers’ perceptions of the fairness of prices have been identified as a major area of interest due to public concern (Martin, Ponder & Lueg 2009). That is why the recent passing of The Competition and Consumer Amendment (Payment Surcharges) Bill by the Australian Senate, which bans excessive surcharging at the cash register using credit card payments, will no doubt affect credit card companies’ pricing decisions and their customers’ perception of value of credit card purchases.–or-cost-us-even-more/news-story/9e46a4c1c7c824d3309c8570825ef35d and

By July 1 2016, a new law that will ban the application of excessive surcharges on credit card payments by not more than 0.5% of card processing costs will take effect. The Australian Retailers Association has welcomed this new law which will ensure that customers are only charged according to the true amount of a credit card merchant’s costs in accepting payment. According to Maxwell (2002), one aspect of price that has been shown to influence purchase decisions is fairness. According to Treasurer Scott Morrison, this new law will give Australian consumers a fair deal. How Australian consumers will perceive this fairness in price-setting would determine their willingness to and/or resistance to buying. This rule-based price fairness (as opposed to fairness in the sense of “cheapness”) will influence the inferred fairness of the credit card companies’ pricing approaches which will ultimately influence their customers’ attitudes towards credit cards and their willingness to purchase.

With the new law some of the pricing considerations of credit card companies would be affected. The new law would influence the 4 pricing considerations in price-setting viz-a-viz marketing strategies, cost of providing the service, customer perceived value and competition. With monitoring by Australian Competition and Consumer Commission (ACCC) and price standardisation setting by Reserve Bank of Australia (RBA), the cost of providing credit card services will be controlled and bench-marked. Competition may or may not be affected as some retailers may decide whether or not to apply the standard surcharges when delivering credit card services. However, customers’ perceived value of the new rate would boost sales as more customers will start using credit card payments for their purchases which will in turn boost bank lending. Previous research has shown that if customers are aware that they are paying more than another customer for a similar transaction, then they may perceive the price to be unfair (Xia & Monroe 2010).

Because price charged on credit card services must be consistent with marketing strategies, marketing managers of credit card companies will have to modify both marketing segmentation, core strategy, positioning and value propositions if they are to win more market shares. With this banning of surcharges, all online perceived transaction values to customers will not only be seen as fair but will create more sensitivity (elasticity) to any price inequality. After all, research has shown that perceived price differences, especially due to price increases, may induce negative customers’ perceptions of price, reduce purchases and prevent sellers from maximising profits (Xia & Monroe 2010).

Since price fairness perceptions are based on comparative judgements (Monroe 2003) evoked by price comparisons, it follows that online purchasers’ increased price convergence will create feeling of safety and confidence among credit card users during online shopping. Credit card holders have perceived as unfair this price increase in form of surcharge especially when the reason for the price increase was seen as unjustifiable. But when this new law comes into effect on 1 July 2016, the principles of equality (similar customers treated alike) and equity (customers’ expectations of actual value commensurate with cost of acquisition) would be achieved both for customers and retailers

This new law will improve consistency and ethicality of credit card companies’ price-setting practices. With this ban, the approaches of credit card companies’ pricing decisions and the considerations of credit card users’ price perceptions would be more than equitable. How the RBA Payment System Board (charged with setting the benchmark for appropriate fees) and the ACCC (charged with policing the law) handle gouging credit card retailers will determine the effectiveness of this new law.


Ferguson, J. (2010). Implementing price increases in turbulent economies: Pricing approaches for reducing perceptions of price unfairness. Journal of Business Research, Volume 67, Issues 1, January 2014, Pages 2732-37. ScienceDirect. Accessed online from

Consumer Affairs Victoria.

Maxwell, S. (2002). Rule-based price fairness and its effect on willingness to purchase. Journal of Economic Psychology. Volume 23, Issue 2, April 2002, Pages 191-212. Accessed online from

Xia, L. & Monroe, KB (2010). Is a good deal always fair? Examining the concepts of transaction value and price fairness. Journal of Economic Psychology, Volume 31, Issue 6, December 2010, Pages 884-894. Accessed online from

Martin, W., Ponder, N. & Lueg, J. (2009). Price fairness perceptions and customer loyalty in a retail context. Journal of Business Research, Volume 62, Issue 6, June 2009, Pages 588-593. Accessed online from


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s