Sunday, October 23, 2005

Frugal Phone Cards : Cheap Service?

What's the deal about phone cards? For $20 to $40 a month, one reader purchases pre-paid telephone cards from a small grocery store. Tapping into the phone card network, her overseas telephone calls cost about 4 cents a minute, she told me.

But phone cards are a mixed bag. Here's the 411:

Pre-paid phone cards typically sell for $5 to $15 (and higher) for a fixed amount of telephone service. For long distance calls in the U.S., phone card rates range from a penny to a nickel per minute. But low rates aren't everything. A few low-cost carriers offer poor service. Others are a good bargain.

Newsstands, travel agencies, convenience stores and many mom-and-pop grocery stores typically sell phone cards. Other vendors include the neighborhood post office and national retail chains such as Walgreen's. It's a big business with many pros and cons for consumers.

On the plus side, phone cards provide convenience. After paying in advance, you can eliminate bills for long distance or international calls on your home or cell phone. And various, distributors offer additional time-saving features, including speed dialing for your favorite numbers or activity reports. To use the service, outgoing calls are routed through either a toll-free number or a local exchange.

Saving money is the main attraction for Cecile Richardson, a Florida resident, who has family throughout the U.S. and in Jamaica. For $2 to $5 a card, Richardson purchases pre-paid service for all of her long distance and international calls.

"I don't have long distance on my home phone, so I use the phone card to call my sister and brother in Queens (New York) and Washington, D.C.," Richardson said.

With the $5 card, she receives about 90 minutes of international calls to Jamaica or 100 minutes of long distance service within the U.S. for calls made on her home phone. However, if she uses her cell phone to dial into the toll-free access number, Richardson receives a dramatic drop in available minutes. For instance, when routing calls through her cell phone she receives only 30 minutes of international service versus 90 minutes for calls routed through her home phone.

And indeed, I noticed a similar pattern when I studied phone cards sold at the little bodega near my home. One $5 card, for example, fixed a surcharge of 99 cents on calls from a payphone and "higher" (but not specified) for cell phone calls.

Other companies charged comparable fees. I also noticed that some cards have a very short expiration date, with a time clock that begins running with your first call. I also spotted a "semi-monthly fee" of 59 cents on some cards. I called the company's 800 number for more details. After a long holding period, the customer service representative explained that the 59-cent fee is actually a weekly fee. But since there is no charge for the first week of service, the company uses the term "semi-monthly."

Therefore, it's important to read the fine print when buying a phone card, according to a report from the Federal Trade Commission, a government agency. The list of potential pitfalls is long.

*Disreputable card issuers, who cease operations and leave you with a worthless card.
*Higher-than-advertised rates.
*Charges for incomplete calls (busy numbers or no answers).
*Low-quality connections
*Ineffective or unresponsive customer service lines.


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