Scam: Prepaid Phone Cards Deliver About Half The Minutes Promised

MSNBC says that a recent study by the FTC showed that on average, prepaid long distance phone cards only delivered about half of the minutes advertised.

Earlier this year, the FTC charged two major calling card distributors with cheating customers. In its lawsuits, the commission claims these firms charge hidden fees and make false statements about the number of minutes customers would receive.

During its investigation, the FTC bought and used dozens of calling cards from these two firms. None of the cards provided the number of minutes promised. On average, they delivered about half the minutes advertised. But in some cases it was much worse. A 360-minute card to Panama gave only 23 minutes of calling time.

In case you think this is no big deal — consider the fact that Americans spent $4 billion on prepaid phone cards in 2007. So how are they getting away with it? A combination of undisclosed fees and misleading advertising — the usual suspects.

Customers are charged connection fees, special fees for using a payphone, minutes are deducted for calls that did not connect and minutes are rounded up by three or four. Yuck.

Prepaid phone card industry under attack [MSNBC] (Thanks, Robert!)
(Photo: Tengaport )

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  1. darkryd says:

    This is a shame. I hope the card companies are held accountable.

    • jaydez says:

      @darkryd:
      Are you kidding? This is America where big corporations are never held accountable for their actions (re: $700 billion bailout).

  2. Sugarless says:

    Thank you FTC for investigating this crime.
    I’d like to see some harsh jail terms for this kind of crap.

  3. gvsteve says:

    Too bad they’re doing this years after prepaid phone cards were big. I remember buying a 1000 minute card that docked me about 45 minutes for a three-minute conversation, within the US. But everyone’s got cell phones now and I can’t remember the last time I’ve seen a pay phone.

  4. Gokuhouse says:

    I’ve never actually used one before…..I never really saw the point.

    • c0ntro1 says:

      @Gokuhouse:

      I think they’re typically used by lower income families that don’t have cell phones/long distance calling or people who need to call out of the country. My boyfriend’s cousin had to use them when he (briefly) lived in the US because it was the only way he could call his family in Venezuela.

      As far as the article goes, that really is a pretty sleazy practice. It’s pretty much another case of a business taking advantage of people that they know won’t, or don’t have the means to, retaliate.

    • BloggyMcBlogBlog says:

      @Gokuhouse: I know a lot of immigrants use them to call back home.

    • Outrun1986 says:

      @Gokuhouse: Maybe if your traveling and you can’t use your cell phone in the place you are going, and if your traveling its probably a good idea to get one for emergencies just in case something happens at least you could run to a payphone and make a call without having to worry about having cash on you or finding change to dump into the payphone. Thats pretty much the point I see with using pre-paid cards.

    • Robobot says:

      @Gokuhouse: I remember how useful they were about ten years ago when cell phones were still a luxury item. Made traveling so much easier.

      Now the only people I know who use them are soldiers recovering at Walter Reed. Every year the charities ask for donations of phone cards because apparently soldiers don’t get free phone calls home. (Or much of anything else, really.)

    • Cat_In_A_Hat says:

      @Gokuhouse: I used them all the time while studying overseas. Used on a payphone and depending on the location (high tourist area vs. residential neighborhood) my 200 minutes would be eaten up within about 30. On a landline I would get close what was about expected for the 5 euro card. (But a lot better than the $45 call home I made using a payphone and a credit card (my disclaimer: yes I do know this was stupid and I deserved to pay the outrageous fees, but being abroad for the first time and alone can cause one to not think before they proceed. I’ve learned my lesson and have been a savvy traveler ever since)

  5. 310Drew says:

    If they do not get the minutes they are supposed to, is this really the cheapest way for these people to make international calls ?

    Have they ever heard of Skype ? Vonage ?

    I’m sure at least 75% of the people that use prepaid cards have an X Box 360 or PS3. If they can afford those extras, perhaps they should look at investing in a personal computer with broadband service so they do not get ripped off on international calls.

    As far as I am concerned, if you get burned once by a prepaid card, why would you try again ? It’s like touching the stove after someone tells you it’s hot ! You might touch it once, but you don’t keep putting your finger back on it to get burned again and again !

    I am almost forgot the super deluxe cable package most of the pre-paid card users probably have as well !

    • tmed says:

      @310Drew:

      I think you need some fact checking before you start spouting nonsense.

      What evidence do you have to support this claim?

      • little stripes says:

        @tmed: “I’m sure at least 75% of the people that use prepaid cards have an X Box 360 or PS3.”

        Really? Ok, please cite sources for your numbers!

        I am from a small town. Pre-paid phone cards are common. Most people there don’t have cell phones. My mom and sister still have dial-up. Most of her friends don’t even have a computer. Some people use pre-paid cards because they don’t have any other options.

    • CumaeanSibyl says:

      @310Drew: You know what happens when you assume…

    • jusooho says:

      @310Drew: So because of a hypothetical 75% ownership of a video game console, it’s these people’s fault they’re being ripped off by unaccountable companies operating illegally or unethically?

    • Veeber says:

      @310Drew: “I’m sure at least 75% of the people that use prepaid cards have an X Box 360 or PS3. If they can afford those extras, perhaps they should look at investing in a personal computer with broadband service so they do not get ripped off on international calls.”

      Ah what? Outside of your circle of friends and coworkers, how many people do you know that know what skype is, and have microphones on their computers? Also, the rates that these phone cards advertise (which may very well be false) still ends up generally being less than the rates that Vonage charges for international calls (8-12 cents for Panama).

      Now on to the Xbox360 example. 10.5 million Xboxes, and 5 million PS3s as of July 1, 2008 in the U.S. So by your estimate there are no more than 20 million people who use phone cards in the U.S., spending $200 each on phone cards? At that rate an unlimited plan with the phone company would probably be cheaper.

      • Geminijinx07 says:

        @Veeber: HUGE assumption. My parents do not own an Xbox or PS3. My uncle and aunt don’t either. In fact, neither do I. I use skype with my parents but my uncle and aunt don’t have it so phone cards it is.

        and the advertised rates are often cheaper than skype so my mother uses a phone card to call sometimes too.

        Talk about ass..uming

      • Xay says:

        @Veeber: Exactly. I use prepaid phone cards to call friends and relatives in several countries Africa because the Vonage rates and even Skype rates are twice as much as the prepaid card I use. Also, just because I have reliable internet access doesn’t mean the person that am calling does, but just about all of them have reliable phone service.

    • GrandizerGo says:

      @310Drew: Hmmm, So all these people that need to make a phone call when they are not at home should just plug in their Xbox that they have carried around???

      Dude…
      FAIL!

    • Acolyte says:

      @310Drew: @310Drew:
      I concur with everyone who has called you out. Alot of the people who use phone cards are people who either
      1. Don’t have cell phones
      2. Don’t have long distance/international phone call service at home
      3. Don’t have internet for skype.
      4. Don’t own an Xbox 360

      So your assumption is nothing short of erroneous.

      Also some people have all the above but calling cards offer the best rates in their opinion.

    • negitoro says:

      @310Drew: I’m even confused about the logic about 75% of console owners using phone cards… like what logical connection do these two parties have?

      Most of the people I know who use phone cards are people living/working abroad or immigrants. Hardly the typical 18-35 male demographic for video games?

      • Oranges w/ Cheese says:

        @negitoro: I believe the point he was trying to make is they can shill out $300 for a console why can’t they afford a computer / broadband.

        But seriously, I’d wager a guess and say that MOST prepaid card users are using them because its easier to get in contact with the people they’re calling not because they themselves cannot use / afford something like skype.

    • TechnoDestructo says:

      @310Drew:

      If you don’t have internet access, or don’t have internet access which you are able to use for internet telephony (highly possible when you’re travelling), yes, it could be.

      Even at half the minutes advertised, it can be cheaper than direct dialing. (I get a pretty decent direct dial rate now, so I don’t bother anymore…Virgin Mobile, BTW)

      There are also situations (airports) where the only way you can use a payphone is to use a prepaid phone card. And yes, there are still times when you may need to use a pay phone (in my case, I was coming back from 2 years overseas, and had not domestic cell phone).

      Also, if you’re an illegal immigrant or a methhead scumbag and you’re not connected into the regular economy of things like utilities and phone lines and stuff, it may be the only easy option you have REGULARLY.

      BTW, I have found the ratings on zscomm.com to be pretty reliable.

  6. SkokieGuy says:

    How can a consumer verify the minutes on a card?

    Is the only way to actually time the minutes of calls, so you don’t know if you’ve been scammed till the card is used up?

    And even if you buy with a credit card, how can you document the shortage to win a chargeback?

    • NikkiSweet says:

      @SkokieGuy: Timing the phone call? I had to buy one to use for a semi-emergency a few years ago… I was stuck in an airport, my flight had been canceled, and if they were going to re-route me, I wouldn’t be getting home until 1-2am. I was coming home from DC, where I had broken my cell phone… my usual way of contacting everyone.

      I bought a 30 minute card, managed to get a 5 minute conversation in with my boyfriend before the card cut me off.

      • RedwoodFlyer says:

        @NikkiSweet: Sounds like they ripped you off with the payphone fee…it’s not their fault you don’t have LASIK + glasses + Acuvue + a Magnifying lens to read the terms and conditions that they wrote in the period of sentence!

    • snoop-blog says:

      @SkokieGuy: one would think that you could just log the times like some people log miles on their car.

    • TechnoDestructo says:

      @SkokieGuy:

      Yes, that’s pretty much the only way AFAIK.

      If you have a record of calls on your phone bill, that would work.

  7. tinky XIII says:

    I’ve been trying to drill this into my roommate’s head. She keeps a few phone cards for “emergencies”, regardless of how much of a rip off they are. She just got a prepaid cell phone, so maybe she’ll stop using those blasted cards now.

  8. BrianDaBrain says:

    I’ve also never used one before, but I sincerely hope the FTC nails the bastards to a wall.

  9. cmdrsass says:

    I dropped long distance on my home phone and have been using pre-paid long-distance cards from Sams Clubs for years. Just program the numbers in to your phone’s speed dial for convenience. At 2 or 3 cents a minute, I save quite a lot considering how few LD calls I need to make each month. I keep records of these calls for billing purposes and the minutes have been accurate. I wouldn’t trust a generic card from a convenience store, though.

    • joe_gillis says:

      @cmdrsass: I agree. If you don’t make many long distance calls per month, this is a much cheaper way to go than paying for a long distance plan with a monthly minimum charge or a high per minute rate thorough a long distance carrier.

    • RedwoodFlyer says:

      @cmdrsass: Those are great because they use this up and coming web 3.0 tech called Caller ID to offer pinless dialing!

  10. freepistol says:

    i hear a lot about people who have been deployed overseas using phone cards. such a shame if they are only getting half the time they, or someone else, paid for to talk to their families.

    • "I Like Potatoes" says:

      @freepistol:
      Yes, these cards are big with soldiers. When my husband was deployed to Iraq in 2003 he called with prepaid cards. The cards you can buy from AAFES are the most reliable. When DH was in Afghanistan last year they had call centers set up for soldiers and calls were free (but only last 10 minutes). When you have 4 kids a 10 minute phone call is much too short! E-mails were our primary form of communication and even then, not always reliable since internet connection was always iffy.

  11. little stripes says:

    Some cards are legit. You just have to get legit cards. Like cmdrass above, who uses Sam’s Club cards.

  12. Ben_Q2 says:

    I have seen that on the back of the cards. As “Gokuhouse” pointed out. I do not see the point. Yes i have a home phone and yes I have a cell phone with no LD charges on them. So a calling card does not work for me. I know people that have used them.

  13. ryatziv says:

    I don’t see why this is such a big deal… if you don’t agree to the terms, don’t use the card. I use a card that costs a bit more per minute, but has no fees and is rounded to the nearest minute. If you’re expecting to make a small number of long calls, another card might be better for you. I call user error.

    • little stripes says:

      @ryatziv: Oh, come on. “A 360-minute card to Panama gave only 23 minutes of calling time.” That’s ridiculous and unreasonable. They are doing this because they are getting away with it. They should no longer be able to get away with FALSE ADVERTISING which is, as you know, illegal. I love how people like to throw around “user error” to make themselves feel superior.

      • ryatziv says:

        @little stripes: We’re not given the specifics of how exactly these numberes were reached, but if the card says “25 cents surcharge for payphones, 50 cent connection fee, $1/month upkeep fee”, and you’re buying it to use for something other than a single call originating from a landline, that’s dumb.

        • little stripes says:

          @ryatziv: My younger sister has been screwed by these cards before. They make it VERY, VERY, VERY difficult to find out the “terms” — in fact, these terms were nowhere on the card. I’m pretty sure you had to call to get these “terms.”

          THEY ARE SCREWING THE CUSTOMERS. I love this “oh whatever, their fault!” mentality. Please. They shouldn’t be getting away with this. Some people HAVE to use pre-paid phone cards, and it’s not right that these companies get away with this. It’s unethical. And likely illegal.

    • JoseRZ says:

      @ryatziv:
      Remember many of the cards require a 10x magnifying glass to read the terms. Also english is not the first language for many of the users. So legalize makes it harder to understand the terms.

      • ryatziv says:

        @JoseRZ: I agree with the magnifying glass comment… so if you are unable to read the terms, don’t use the card *shrug*
        English is my second language.

        • little stripes says:

          @ryatziv: What of people who don’t have any or many other options? Why is it okay for them to be taken advantage of them? I swear, the ignorance, arrogance, and privilege has been RIPE in consumerist lately.

          • ryatziv says:

            @little stripes: Welcome to America, one of the world’s foremost capitalistic societies. Isn’t it great? If you don’t like to read the fine print, this probably isn’t the place for you.

            • little stripes says:

              @ryatziv: Um… There are rules, regulations, and laws regarding advertisement. even NetFlix couldn’t get away with it without a class-action lawsuit, and they were no where NEAR this horrible.

    • Tmoney02 says:

      @ryatziv: I have little sympathy for companys who advertise one thing and then tack one a tons of hidden fees. Its why I hate Airlines and taxi cabs. (gas surcharge, trunk fee, passanger(s) fee(s), rush hour fee, etc.)

      Why should you even advertise a price or in this case minutes if it comes down to being ala carte pricing? If nothing else wouldn’t the phone companies be more honest by offering 5 or 10 dollar service cards rather than saying so many minutes and then not providing them.

      Basic point – Why should hidden fees ever be allowed i such instances?

      If you say a ticket costs so much – that’s the price period. If a ride costs so much per mile – that’s the cost end of story. Finally if you advertise X amount minutes for Y dollars, that’s the amount provided, period.

  14. trellis23 says:

    What’s really sad is that for deployed military people, this is one of the only ways to call home.

  15. bikeoid says:

    Some cards obfuscate their rate by boldly advertising the number of “UNITS” on a card. The card packaging doesn’t even list how many minutes this will translate into when used on a non-pay phone. The hidden fees are X units per call – even if no connection is made, as well as calls using a minimum of X units even if only 1 minute long.

  16. bikeoid says:

    Costco also offers calling cards with great rates.

  17. eelmonger says:

    Many international cards work like this: they give you X minutes, and for countries that would normally be cheap to call (e.g. Mexico, Canada, UK) you get X minutes of talk time, that is the advertised time. For other countries that are more expensive to call there an “exchange rate” where it’s something like 3 card minutes equals 1 minute of talk time. The conversion rates are usually listed on the packaging. The so-called hidden fees are also almost always disclosed on the packaging as well.

    While it’s not an ideal system it lets them sell one international card that works for all countries instead of having to make tons of different cards for all the different rates. I’ve also seen plenty of cards that just say they are $10 cards and list how much per minute to each country they are, which is probably what they should all be.

  18. Khuluna says:

    I must be lucky. I used Red Texas to talk to a Canadian friend while I was in (guess where!) Texas, and I often got WAY over the 100 minutes they sold me. And it had a nice little voice at the beginning of every call telling you how many minutes you had.

    The one time I actually wore one all the way out, an operator interrupted the call to let me know, and gave me an extra 5 minutes! :3

  19. West Coast Secessionist says:

    If you do make a decent number of international calls each month, it might be worth it to just get the $5 “AT&T Worldwide Value Calling” plan from AT&T (assuming you’re in ATT territory–i don’t know what similar thing VZ may offer).

    My company added that feature on and now our calls to France, for example, are 9¢/min vs the $5.00 or more per minute it used to be.

    Even better, they backdated it a month when I added it, saving us over $800 from calls we’d already made, without me even asking them to.

    You can look up the rate for your favorite country here:
    –> [www.shop.att.com]

  20. ajlei says:

    Back in 2004 (before I had a cell phone) I drove cross-country with my grandparents from Portland; somewhere in Nebraska I decided to get a phone card for $20. I think it had maybe 250 or 300 minutes. Anyway, I used it a lot during my three week trip, and it didn’t run out, and I ended up using it again much later that year for some international calls. Even with those I remember getting what seemed like more than what the card said as far as minutes, but certainly not less. And I even bought it at a Walmart too! (There weren’t any other stores nearby, fwiw)

    So, I guess my only experience with a calling card has been good, but I can certainly imagine in more recent years the terms changing or them trying to save by cheating customers.

  21. TWinter says:

    Back when I used to make lots of international calls I used to buy these all the time. If you found the right card for the country you were calling and the type of phone you were using, you could get very good deals, much better than the international calling plans offered by the telephone companies.

    I used to buy them at a store that carried at least two dozen different brands of cards and the people at the store had made a chart that showed the best deals for specific countries and telephone conditions. The best deals totally depended on the country you were calling and the type of phone you were using. I mostly bought the “Lucky Seven” brand phone cards – they were a great deal for a while but I never would have touched them without that store’s handy dandy chart.

    • DeltaTee says:

      @TWinter: That sounds good, but it is much easier to blame “the man” for keeping you down if you don’t read what you’re buying. You’re one of the good guys.

  22. AnnataOyster says:

    I have been using calling cards for over 10 years now, without any real big problems. I have always bought my cards from Callingcards.com and not from stores. I have found that reputation in this industry is everything, and they have been around awhile, and they only sell good cards. This helps me figure out which cards are bad and not. I only buy from them.

  23. oregongal says:

    We use one to call to the UK to his family. Never had an issue getting the full number of minutes paid for and always (when needed) good customer service.

    [www.nobelcom.com]

    • oneandone says:

      @oregongal: I love nobelcom! I’ve been using them for years – my family lives abroad, so I call about once or twice a week. Fantastic rates, very nice customer service (though I’ve only had to use them once in 3 years), never had a billing error, and very convenient. I like their promotions also, though they may be out of reach (or impractical) for the casual usual (10% off purchases of $50 or more, etc).

      There’s no physical calling card – you purchase a PIN from the website and then just use it from your or any phone. I’ve enjoyed it a lot.

  24. BinaryTB says:

    Do what I did, drop phone cards, switch to VoIP “calling cards”. You call a number, get a dial-tone, dial where you want to. If you want incoming, go to their website (via cell phone or web browser), initial a call back, get a dial tone.

    Lots of voip companies do this… future nine, callwithus, inphonex, etc etc.

  25. harlock_JDS says:

    my wife uses these a lot to call home (she is Filipino) and they never deliver the promised minutes (usually they disconnect so often or just don’t connect in the first place you spend half the card amount on redialing over and over, no to mention the minimum charge per call)

    Unfortunately most of these ‘call internationally for one low monthly fee’ VoIP plans only includes canada, mexico and a few europien countries, not the phllipines, UAE or anywhere else we actually have to call so the cards (and the problems that come with them) are still cheeper.

  26. SudhiraAeolus says:

    I work for a prepaid phone card company, and yes, this is an industry wide “problem.” Fact is, the cards you pay for are heavily discounted from its face value ($4 for a $10 Phonecard), and the term, “You get what you pay for,” applies. The cheaper the card, the less minutes you’ll have. What helps is if you call the card’s customer service (on the card), and ask for “actual minutes, after fees and taxes” and they will tell you how many minutes you can realistically talk for. And no, “fees and taxes” isn’t a bs charge, our carriers charge us a certain rate for certain countries, and we pay that rate, add some extra “fees” for profit and bam, your actual minutes. Keep in mind, also, that phone card companies use different carriers w/ different call qualities and rates for different countries.

    There ARE cards that have no fees, no taxes, and you get the advertised minutes exactly (plus or minus ten minutes), and they usually advertise this feature on the card itself. They are, of course, more expensive, but again, still discounted from the face value. On another hand, there are some shady companies that says “no fees, no taxes” but still has some.

    Anyway, if anyone is looking for a card with no fees, taxes and actual minutes, you can order the Positive Gold card on pin99.com, but ONLY the $20 Positive Gold card. Strangely, the $10 Positive Gold card has fees and taxes, even though the “Gold” line advertises no fees and taxes.

    Either way, Im the customer service rep for this company, and I know these cards in and out. We have 200 cards, and only 2 or 3 of these are “honest” cards. It is an industry wide problem, and every company does it. It isn’t right, but thats just how it is.

    Good cards exists, you just have to find them.

  27. unpolloloco says:

    So the FTC is investigating prepaid calling card companies because they charge connection fees on every call (and clearly state that they do)? Our tax dollars at work.

    • RedwoodFlyer says:

      @unpolloloco: Has more to do with them charging for calls that don’t go through and the fact that companies “mysteriously” disconnect you every few minutes and still round up and recharge the connection fee

  28. Xay says:

    Look, there are good prepaid phone card companies and bad ones. The ones I use now are great and are upfront about how many minutes you are actually buying to call any particular country, but I have been burned by some that didn’t disclose hidden fees until you actually use the card. Just because some companies are upfront doesn’t mean they all are.

  29. vastrightwing says:

    But are they taking this very seriously?

  30. noodleman says:

    This is an interesting thread.

    I have a parent who resisted having to use Qwest or AT&T for long-distance after a recent move because of the cost of overseas calls, so found her a much-cheaper prepaid phone card online. We’ll have to have her keep track of the call-length in the future but her first use of the account yesterday resulted in a great difference in price-per-minute … from the advertised 1.3-cents to more than 3-cents per minute. Granted, this particular card rounds up to the nearest minute but her 60-minute (she thinks) phone call cost $2.10. This particular card also advertised itself as “no fee.”

    Some of the extra cost I’m sure can be attributed to the various Federal and state surcharges that appear on all of our phone bills and which the company does state can reach 20% of the final phone charge. But we’re curious to know the real cost of her calls vs. the advertised price from here on.

    Not that we’re really complaining. It’s certainly cheaper anyway than going with AT&T. And I can remember when a call overseas cost beaucoup bucks, e.g. $5 per MINUTE to Singapore ca. 1980.

  31. David in Brasil says:

    I live in Brasil, in a small town that has terrible internet connection. So, yes, this thread is relevant to my interests. Using MCI to call the US is outrageously expensive, so I buy these prepaid cards. The good point is that they nearly always work, quickly, with a good signal. The bad point is that the minutes seem to run out way faster than they should.

  32. Kimaroo - 100% Pure Natural Kitteh says:

    I met my husband online and back when we were “dating” I used lots and lots of phone cards calling him at his house in Australia.. we did much more IMing too, but internet in Australia is nothing like it is here.. so the phone was always much easier for talking “in person”.

    We used to buy phone cards for him to call back home to his family but we don’t anymore.. we just make sure we always have a landline so his family can call us.

    We’ve been duped by a few cards over the years.. I remember one really bad one.. it had an 8 ball on it.. I think it said something like 3 hours were availible for the number we called (Aus) but we only ended up getting like 5 minutes. Terrible.. but that was a few years ago.

  33. ldavis480 says:

    My wife uses phone cards often to communicate with her parents in the Philippines. We’re constantly being ripped off by various phone cards but none so much as STi. Here’s our Rip-Off-Report about the biggest rip off incident:

    [www.ripoffreport.com]

  34. pthomas745 says:

    [www.onesuite.com]

    Onesuite is a perfect way to make long distance calls cheaply and easily.