College students, traveling salespeople and those who don’t have regular phone service are expected to buy billions of dollars’ worth of prepaid phone cards over the next few years, making this one of the fastest-growing segments in telecommunications.
To a great degree, the cards are the equivalent of having a roll of quarters in your pocket. You can call from a touchtone phone to virtually any spot on the globe. The cost of the call will be subtracted from the amount you paid for the card. When you run out of time, you can often “recharge” the card by punching in a credit card number-or simply buy a new one.
What are prepaid phone cards? They’re plastic squares that bear an 800-number and a personal identification number. By dialing the toll-free phone number and punching in your PIN (personal identification number), you gain access to an account that entitles you to a number of minutes of phone time, set when you buy the card. A company that charges 50 cents per minute will provide you with 20 minutes of phone time when you buy a $10 prepaid card, for example.
Telephone companies like the cards because you pay upfront. There are no billing hassles or collection problems. Moreover, some people simply buy the cards as collector’s items and never use the phone time-pure profit.
However, some regulators worry that con artists will infiltrate the industry for much the same reason: They could sell millions of cards before anyone tried to use them and found out that they were worthless. Moreover, even among legitimate issuers, the prices and terms vary widely. And since few consumers know the ropes in this fledgling industry, some fear they won’t ask the right questions to determine if the cards are a bargain or a bust.
What questions should you consider?
First, determine how you’ll use the card. Will it be mainly for making brief phone calls on the road, or are you planning to use it as a substitute for normal long-distance service? Are specialized features, such as fax-back or speed dialing, important to you? Or are you mainly interested in per-minute rates? Once you’ve answered those questions you can take a look at the specifics of each deal to determine the most cost-effective option.
The specifics:
– Per-minute charges. Issuers charge between 25 cents and $1 for each minute of phone time. The cheapest per-minute rates are typically offered by telephone time resellers-corporations that buy huge blocks of long-distance phone time at discount rates and then resell the time to individual consumers. If you plan to use the card for lengthy calls, per-minute charges are pivotal.
– Billing segments. Does your phone-card company bill by the minute or in 30-second, 15-second or 6-second intervals? If you use only a partial segment of time-10 seconds out of a one-minute billing period, for example-does the carrier round up or round down? For people using the cards for brief calls-checking or leaving messages while on the road, for example-watching billing segments can make more sense than watching per-minute rates.
Consider, for example, the cards offered by Pacific Bell and AT&T. AT&T briefly had a sale, dropping its 60-cents-per-minute rate to 45 cents-5 cents cheaper than Pacific Bell’s rate. However, AT&T bills by the minute. Pacific Bell bills in 6-second intervals.
What happens when you make ten 30-second calls? You’d pay $2.50 on your Pacific Bell card, but $4.50 if you were using AT&T’s “sale” price.
– Cost of the plastic. Some cards are free; others cost $10 or more. If you’re paying for a slip of plastic, the issuer should be providing something that makes the cost worthwhile. That could be as simple as an attractive design that promises to make the card “collectible” or a service that’s not provided by others, such as the ability to send or receive faxes, voice mail or speed dialing.
– Expiration date. The telephone time on a prepaid calling card often is good only for a set period. If you buy more long-distance units than you can reasonably expect to use in the time allotted, you’re throwing money out the window.
– Issuer solvency. If you’re dealing with one of the big phone companies, you probably don’t have to worry about whether they’ll be in business tomorrow. If you’re dealing with a reseller of phone time, you do. Many of these companies are young and untested. Only a handful is required to put money in trust to ensure that their customers will get the phone time that they paid for. Already one issuer, which sold millions of dollars’ worth of cards, has gone belly-up, experts note.
– Rechargeability. Some cards expire once the last minute of time is used up. Others can be “recharged” when you’re running low. If you want to be able to add time conveniently, buy a rechargeable card.
– Access. There are two types of prepaid calling cards. One has a magnetic strip that you swipe through a properly equipped pay phone. The code in the magnetic strip automatically debits your account for the call. In Europe and Asia, these types of cards are common. But in the United States, few pay phones are equipped to handle them.
The other type of card requires consumers to dial an 800 number to access their account. That number usually puts you into a computerized system, where you punch in your personal identification number to gain access to your account and dial out.
By and large, you can’t make prepaid calling-card calls from a rotary phone. And if you are making a call from a pay phone, you could also have a problem if the operator shuts off the dialing “tones” once you’re Ringing up long-distance charges connected, as some do.
RINGING-UP LING-DISTANCE CHARGES
Prepaid cards can be a bargain for people making short phone calls, but if you’re chatty, you’ll pay more because the per-minute rates are generally higher. Take a look at how AT&T’s daytime charges stack up on one-minute and 10-minute calls from Los Angeles to Boston using various options.
%% 1-minute 10-minute
Method used call call
Collect with operator handling $3.07 $5.50
Collect automated handling 2.32 4.75
Calling card 1.07 3.50
Prepaid card 0.60 6.00
Los Angeles Times Syndicate
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