Ben Brooks doesn’t have a long-distance account for his home phone in Coral Springs, Fla., or at his central Florida vacation place in Bushnell, but that doesn’t stop him from making plenty of far-flung calls.
Brooks uses a prepaid calling card, which offers a set amount of long-distance calling time for a flat price.
“I use them so much, I memorize the numbers on them,” he said. “To me, it is just so much more convenient.”
Anthony Chau, who was born in Vietnam, likes the discipline of using a prepaid card for calls to his homeland.
“When your money runs out, that’s it,” he said of the $20 “Little Saigon” cards he buys at the Asian grocery where he works in Lauderdale Lakes, Fla., good for 60 minutes worth of calls to Vietnam.
“When you call from home, it’s unlimited. You talk and talk and don’t know how much you’ve talked until the phone bill comes.”
Retail sales for prepaid calling cards in the United States are expected to top $3.6 billion this year, up from $40 million in 1993, said Howard Segermark, executive director of the International Prepaid Communications Association, an industry trade group based in Washington, D.C. Although annual growth rates have been as high as 50 percent in the past, he said the association expects to see growth leveling at about 20 percent a year.
One of the fastest-growing markets is the immigrant community, Segermark said. More than half of all the calls made with prepaid long-distance calls are international.
But although prepaid calling cards have become a popular alternative to traditional long-distance service, their widespread acceptance doesn’t mean they are always consumer-friendly.
“It is definitely a buyer-beware marketplace,” said Rick Moses, bureau chief at the Florida Public Service Commission’s Bureau of Service Quality. Complaints have fallen off since the mid-1990s, when the cards were new on the market. But Moses said recent tallies of about 50 complaints a year are not a true reflection of the problems consumers have with the cards.
“People don’t have a lot of money invested, and it’s not worth their time to track down problems,” Moses said. “They might try to contact the company, and if that doesn’t work they just toss them. Some of them don’t even know they can call us when they have a problem.”
Easy business to enter
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Segermark’s trade association has strict disclosure rules for its members, but he said consumers have to be careful about getting the right cards.
“It’s relatively easy to go into business with prepaid calling cards, and the competition is intense,” he said. “Some may enter the business who are undercapitalized, have little business experience or are ethically challenged.”
There are many layers–and players–in the calling-card business: Long-distance carriers provide the underlying service, and resellers buy minutes from long-distance carriers. Resellers peddle the minutes to companies or individuals called issuers, who set prices and provide customer service.
In some cases, distributors buy cards in bulk and resell them to retail outlets, such as truck stops, discount stores, groceries and filling stations. Some cards are sold on the Internet, others in vending machines. In other cases, long-distance carriers hook up directly with retail outlets to sell cards.
Ravi Bedessee, who owns Bedessee East-West Indian Foods, a Caribbean grocery store in Lauderhill, Fla., sold so many cards he decided to launch his own brand-name card under an agreement with IDT Corp., a telecom company that provides network long-distance services and calling cards. He sells about 500 of the Bedessee cards a month now, more than half the cards his store sells.
Bedessee said he uses his cards to call Guyana, where he was born. He can get roughly 22 minutes from a $5 card, he said, compared to about $1.50 a minute, plus tax, when he calls from his home phone.
However, many consumers have run into plenty of surprises, including bogus cards that don’t work.
Linda Sherry, editorial director of Consumer Action, a national consumer advocacy group based in San Francisco, said that despite regulatory oversight and strong industry guidelines, prepaid calling cards are a major consumer problem.
Some cards put required disclosures in small type that many consumers can’t read, or on signs that are hard to find or to read quickly while shoppers are in line. Some disclose per-minute rates but fail to mention hefty surcharges for using pay phones or for calling cell phones.
“The cards are so confusing, it’s almost an impossible marketplace for the consumer to monitor,” Sherry said.
Watch for hidden costs
The biggest problems with calling cards are hidden costs, such as connection charges per call, minimum charges, taxes, maintenance fees, start-up charges, activation fees to recharge the cards for reuse and other surcharges that aren’t clearly revealed.
Another big problem is cards with short-term expiration dates.
In addition, the Federal Trade Commission points to these problems with calling cards:
– Issuers who go out of business and leave the consumer with a useless card.
– Cards that have toll-free access numbers that are always busy, or provide customer service numbers that never are answered.
– Cards that debit minutes even when you don’t get connected, or use large increments, like three minutes, to round upward.
– Cards that don’t have packaging or stickers that cover the personal identification number, which means anyone who handles the card can copy the number and use the minutes before you buy it.
Regular users like Brooks usually find out the hard way that not all prepaid calling cards are created equal. While visiting his brother in Little Rock, Ark., two years ago, he bought an “off-brand” card at a filling station, which promised 500 minutes for $10.
“By the time I had made my fifth call, I noticed a surprising reduction in minutes, because I was writing down the length of each call,” he said. “I finally discovered I was paying a 25-cent-per-call connection charge, and they were taking the charges out of my minutes.”
Brooks said now he sticks to cards sold by major long-distance carriers that do not include connection charges and build taxes and other fees into the stated price, which can be as low as 3.4 cents a minute for domestic calls. He buys them almost exclusively at large membership-based discount retailers where he gets the best prices.
“The most important thing I’ve learned is that you always have to know if there is a connection charge, and what it is,” he said.
Consumer Action’s Sherry concluded that consumer loyalty pays off in the prepaid calling-card arena.
“You have to work your way through the maze of cards, but once you find a good one that works for you, stick with it.”