Buying time: The facts about phone cards

For many people, prepaid phone calls offer the ultimate in convenience.

But as the prepaid phone card industry mushrooms, and as more people buy

and use the cards, some problems are coming to light.

First marketed as clever novelties, prepaid phone cards now are sold

at newsstands, post offices, travel agencies, retail stores, and grocery

and convenience stores. They are used mostly by travelers, students, people

who regularly call overseas and those who may not have long-distance telephone

service.

You pay upfront for local or long-distance phone time; the amount of

time you buy depends on the rate-per-minute you're charged. The phone time's

been paid for in advance, the card can be used from any phone, and there's

no need to think about carrying coins or paying a bill later on.

Some prepaid phone cards can be recharged, usually by billing the additional

cost to your credit card. And some cards have advanced features such as

speed dialing for frequently called numbers and an activity report of called

numbers, which may be handy for business purposes. Occasionally, prepaid

phone cards have a hidden cost: Because you've paid upfront, you may be

out of pocket. That's a big difference between prepaid phone cards and traditional

long-distance calling cards, where charges don't appear on your bill until

after you've made the call. Some issuers provide a replacement number on

a separate document when you buy the card. If your card is lost or stolen,

give the issuer the number to recover your unused calling time.

How Prepaid Calling Cards Work

Most prepaid phone cards display a toll-free access telephone number

and a personal identification number (PIN). Prepaid phone card companies

have computers that use your PIN to keep track of your card usage — how

much phone time you have on your card in minutes or units. To make a phone

call, you dial the access number, enter your PIN, and at the voice prompt,

enter the phone number of the party you're trying to reach. A computer tells

you how much time — or how many units — you have left on your card, and

how to use other features your card may offer. Typically, each unit equals

one domestic minute. If your prepaid phone card can't be recharged — that

is, if you can't buy additional minutes by phone for the card — you'll need

to buy another card once you've used up the time or minutes.

Consumer Concerns

The most common consumer complaints are about:

* Access numbers or PINs that don't work.

* Issuers who go out of business, leaving card-holders with a useless

card.

* Customer service numbers that are busy or simply don't work.

* Toll-free access numbers that are constantly busy, preventing use

of the card.

* Rates that are higher than advertised.

* Hidden connection charges, taxes and surcharges.

* Cards that debit minutes or units even when you don't connect with

the party you're calling.

* Poor-quality connections.

Buying Time and Value

You can avoid many of these problems — and buy considerable peace of

mind — by planning ahead. Although many prepaid phone cards are impulse

purchases, you can pre-empt disappointment by checking out a few things

in advance:

* Ask if the retailer will stand behind the card if the telephone service

is unsatisfactory.

* Look for the rate for domestic and international calls on the card's

package or on the vending machine. These rates may vary depending on where

you call. If you can't find the rate, call the card's customer service number.

* Beware of very low rates, particularly for international calls. They

may indicate poor customer service.

* Look for disclosures about surcharges, monthly fees, per-call access,

and the like, in addition to the rate-per-minute or unit. Some cards add

a surcharge to the first minute of use. Others charge an activation fee

for recharging cards.

* Check on expiration dates. Most cards expire one year after first

use. If there is no expiration date, a card usually is considered "live"

until all phone time is used.

* Look for a toll-free customer service number. If the customer service

number isn't toll-free or displayed, it may be difficult to contact the

company if you have a problem with the card. A busy signal on the customer

service line may be a tip off to a rip-off. Be sure the card comes with

instructions that you understand.

* Make sure the card comes in a sealed envelope or has a sticker covering

the PIN. Otherwise, anyone who copies the PIN can use the phone time you've

paid for.

—Zall, Bureaucratus columnist and a retired federal employee, is

a freelance writer based in Silver Spring, Md. He specializes in taxes,

investing, business and government workplace issues. He is a certified internal

auditor and a registered investment adviser. He can be reached at miltzall@starpower.net.

OTHER MILT ZALL COLUMNS

"Don't let inflation get you down" [FCW.com, Aug. 11, 2000]

"Making the right financial move" [FCW.com, Aug. 4, 2000]

"Free advice on debt" [FCW.com, June 9, 2000]

"Vacation homes can offer a break from taxes" [FCW.com, April 7, 2000]

"Keep track of financial records" [FCW.com, March 10, 2000]

BY Milt Zall
October 13, 2000

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