Prepaid Phone Cards Loaded With Fees That Chew Up Callers' Cash

If you’ve lived in a major U.S. city, or anywhere else with a dense immigrant population, you’re probably familiar with the wide array of prepaid phone cards available for folks who want to make international calls. But a new investigation by our pals at Consumer Reports shows that these cards have complicated fee structures that could quickly eat up the value on the card.

CR went around to gas stations, bodegas and shops all around New York State and looked at 130 different cards available for making international calls.

First off, nearly three-quarters of the cards investigated didn’t disclose their calling rates, reports CR. And then there was no consistency in what buyers get for their money. One card offered more than 20 hours of calling to Mexico City for $5 ($.25/hour), while another card only 5 minutes for $2 ($24/hour).

Finally, there are all the confusing fees. CR found that often the only way to get all the minutes listed on a card was to use the entire allotted amount in one call. If you make multiple calls, you’re hit with things like hang-up or disconnect fees of up to $1, maintenance fees of $1 a week beginning the day the card is first used. Some cards have mysterious “surcharges” of 35% or more.

“It’s as if you spent $2 at a store to buy a container of milk, but had no idea until you got home whether they had given you a pint or a gallon,” said Consumer Reports Managing Editor Bob Tiernan. “Consumers need to get better information on costs per call so they can do some comparison shopping.”

In a statement, Michele Ellison, head of the FCC’s enforcement bureau, tells Consumerist:

The FCC is committed to strong, consistent enforcement action in this area. We have sent a clear message that misleading consumers doesn’t pay and won’t be tolerated. Over the last nine months, the FCC has taken aggressive enforcement action, proposing $25 million in penalties against five prepaid card companies.

Following the investigation, Consumer Reports came up with these tips for avoid getting screwed over by phone cards:

• Consider alternative services such as Web-based calling. Many offer a more convenient and transparent international calling experience than phone cards. Phone companies may also offer low-cost monthly plans.
• Consider your calling patterns before choosing a card. If you typically make long international calls, a card with low-per minute rates and a modest connection fee may be a good value. Unless you are planning on using all or most of the minutes on your card in one call, avoid cards with post-call and maintenance fees.
• If you make infrequent international calls, consider a no-fee card from one of the national retailers. They can often be researched and ordered online. Watch out for cards that advertise “units” instead of minutes.
• If you make calls to one particular country or region, look for cards that advertise good rates to those regions. If you call to a number of international regions, look for a card that advertises global calling or buy more than one region-or country-specific card.
• You should be able to look at the card and read the information on the back of the card; if the store won’t let you see the card without buying it, go somewhere else. Ask if the store has a rate sheet poster for the card. Try to buy locally, so if there’s a problem you can bring the card back to the store.
• Buy cards as you plan on using them, and don’t buy too many at once. Some cards start the clock on expiration from their activation date at the store. Also, card issuers can and do go out of business, leaving worthless cards behind.
• If you have problems with a phone card and can’t resolve it with the issuer, report them to: the Federal Communications Commission and the Federal Trade Commission. In New York, you should also report problems to the state’s Attorney General Consumer Complaints Office and Public Service Commission. In other states, contact your state Attorney General’s office or visit www.naag.org