Dollars & Sense

Getting the best deal on prepaid phone cards

Buying prepaid phone time is like playing poker: The right card can make all the difference.

But if you want to make the odds work for you, you'll need to shop around.

If you've picked up a phone card recently, you're in good company. Americans use prepaid phone cards to make more than 8 billion calls annually, according to estimates from the International Prepaid Communications Association, an industry trade group.

The cards are especially popular with students, recent immigrants, military personnel, teens and travelers. Senior citizens and small businesses use them to control expenses, while roommates buy them to avoid fighting over phone bills every month.

"I definitely think they can work for people who want to limit toll calls," says Linda Sherry, spokesperson for Consumer Action, a national nonprofit organization.

But are these callers getting the best deal? That all depends on how well they read the fine print before they buy.

The price of phone card minutes has dropped dramatically, thanks to increasing competition among providers. But minutes are only part of the equation. Carriers can levy a host of fees for everything from connection charges to weekly or monthly fees simply for maintaining a card.

Shop smart
In a constantly changing marketplace, buyers need to shop around regularly. A Consumer Action study found that discount clubs -- like Costco and Sam's Club -- tend to offer the best buys in prepaid phone cards, according to Sherry. Drug stores and discount stores also offer good deals.

Once you find a good price, start asking questions. Begin by looking for three things: 1) Who is really providing the service? 2) What are the terms and conditions and 3) Is there a toll-free number if you have questions before or after you buy?

"You should not have to buy it and open it up to discover the issuer or the rules," says Howard Segermark, executive director of the International Prepaid Communications Association.

Sherry advises buying from reputable stores and sticking with well-known carriers. With an established company, it is usually easier to reach customer service if you have a problem. You also can be reasonably certain the company will still be in business next week.

"There's always the chance when you're buying that a card won't work -- it will just be a piece of paper," says Sherry. "Or that someone trying to reach customer service [will get] a phone that just rings and rings."

Best bet: Go with a name you know, try out the customer service number before you buy and opt for a carrier that is vetted by the IPCA.

Many of the big players in prepaid phone cards include names you've probably heard before, like AT&T, Sprint, MCI, IDT, Qwest, ILD Telecommunications Inc. and Global Prepaid Alliance.

It might be a good idea to buy a smaller denomination to try a company or its card program.

"Don't go out and buy a $50 card if you've never heard of the company," says Sherry. "Buy a $5 card, try it out and call customer service."

And if a company promises too much -- like a penny a minute rate -- beware, says Segermark. "It's probably not true."

A good fit
Just like a pair of shoes, you want to look for the card that fits you best. Before you buy, look at your needs. If you'll be making frequent short calls, avoid cards with connection fees or calling minimums. But if you're making longer calls less frequently, it might be worth trading a reasonable connection charge for a lower per minute rate.

A good rule of thumb is to look at the cost of the call, rather than the cost of the minutes, says Segermark.

If you want a card to keep in your wallet for emergencies, you probably want one that is good for at least six months to a year -- preferably one that won't levy daily, weekly or monthly fees. But if you are using the card regularly, or for a specific special occasion, you might not mind a card that expires in 30 to 90 days.

If you want to make international calls to specific countries, shop prices on those rates in advance. Look for toll-free customer service, and use the number to shop calling costs to the country of your choice before you buy.

Comparing prices is not always as easy as it sounds. Orange County, Calif., resident Tina Bartel shopped diligently when she decided to purchase a card to keep up with her student daughter overseas. Specifically, she wanted to know if her calls would be rounded to the nearest minute.

"But I had a hard time finding programs that would give me enough information to make a decision," she says. "And it seemed purposely so, because that seems like a terribly simple thing to include if you want people to shop."

Same card, new deals?
Not all disposable cards are disposable. Many companies allow customers to buy more minutes, or "recharge" their cards. With the new technology consumers have all kinds of options for recharging, from customer-service phone lines to the Internet to experimental programs that use local ATMs. But that presents a whole new set of questions, too.

If you're buying a card for long-term use, ask about the recharge policies. There may be a fee to recharge. And in some cases, companies could increase the per minute rates as well. Just because you're using the same card doesn't mean you automatically have the same deal.

Several carriers are even taking the "cards" out of prepaid phone cards. Instead, if customers choose, they can purchase minutes online and access them through a pin number.

"We advise people to be very cautious when they buy minutes on the Internet," says Sherry. Her group urges consumers to use the larger providers that "have been around a while."

Dana Dratch is a freelance writer based in Atlanta.