Thursday, January 25, 2007

FTC report on phone cards

At Viapin, customer satisfaction is the whole reason of our work. That's why we want to reproduce this document from the FTC that offers a great research on calling cards & phone cards usage and gives some instructions on how to choose them, prevent and report any inconvenience a user may encounter.

You can find a pdf version of this document here.

Buying Time: The Facts About Pre-Paid Phone Cards

Pre-paid phone cards represent telephone time you buy in advance. You pay from $5 to $15 or more up-front for local or long-distance phone time; the amount of time you buy depends on the rate-per-minute you’re charged. For many people, pre-paid phone calls offer the ultimate in convenience. The phone time is paid for in advance; the card can be used from any phone; and there’s no need to think about carrying change or paying a bill later on.

But the Federal Trade Commission, the nation’s consumer protection agency, says that pre-paid phone cards can have hidden costs. Because you pay in advance, you may be out of pocket — and out of luck — if you discover a problem trying to use the card. That’s a big difference between pre-paid phone cards and traditional long distance calling cards, where charges don’t appear on your bill until after you’ve made the call.

First marketed as clever novelties, pre-paid 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. Some pre-paid phone cards can be refilled, usually by charging the additional cost to your credit card. And some cards have features like speed dialing for frequently called numbers and an activity report of called numbers, which may be handy for business purposes.

Some issuers provide a replacement number on a separate document when you buy the card. If your card is lost or stolen, you can give the issuer the number to recover your unused calling time.

How Pre-Paid Calling Cards Work
Most pre-paid phone cards display a toll-free access telephone number and a personal identification number (PIN). Pre-paid phone card companies have computers that use your PIN to keep track of your card usage — how much 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 minute for a domestic call. If your pre-paid 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.

Several key players are involved in making sure your phone card works:

  • Carriers are responsible for the telephone lines that carry your calls.
  • Resellers buy telephone minutes from carriers.
  • Issuers set the rates and provide toll-free customer service and access numbers.
  • Distributors get the cards to retailers.
  • Retailers sell the cards.

The carrier or reseller is not likely to be responsible for any problems you may have, unless the carrier or reseller also issued the card.

When you buy a pre-paid phone card from a store, it’s important to remember that the store doesn’t control the quality of the service. To make sure you’re getting what you paid for, you may want to buy a card for a small denomination first to test out the service, and check with friends or relatives to find out their experience with the card.

Consumer Concerns
As more people buy and use pre-paid cards, some consumer complaints have come to light:

  • 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 you from using 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; and
  • poor quality connections.

Buying Time and Value
Consumers can avoid many of these problems — and buy considerable peace of mind — by planning ahead. Although many pre-paid phone cards are impulse purchases, you can avoid 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.
  • The pre-paid phone card industry is highly competitive. But very low rates, particularly for international calls, 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 already paid for.
  • Ask friends and relatives about their experiences with the card you’re thinking of buying.
When you ask friends or relatives about their experiences with a prepaid phone card, consider these questions:
  • Are they charged for a call if there is no answer or when the line is busy?
  • Is there a minimum charge for each call? For example, are charges based on a minimum of three minutes even though the call lasts 30 seconds?
  • Is the access number inaccessible because of a constant busy signal?

Selling Cards
If you want to distribute pre-paid phone cards or sell them in your store, the same considerations apply. Ask the distributor for references of the company providing the phone time and try to determine whether the rates being offered are competitive. Very, very low rates may not result in high quality service, and may be offset by undisclosed charges. Consumers are more likely to return to your store expecting a refund if the cards they buy don’t work.

For More Information
If your card doesn’t work even after you’ve called the customer service number, call or write to the following organizations:

  • Your local Consumer Affairs Department or state Attorney General.
  • Your local Better Business Bureau to file a complaint or get a report based on customer experience.
  • The Federal Trade Commission.

The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint or to get free information on consumer issues, visit or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.