A pre-paid calling card (phone card) is purchased to make long distance phone calls. Many people use a pre-paid phone card because of its low rates and convenience - it can be used anywhere - and because it is paid for in advance. Pre-paid phone cards are popular among travelers, students, people who frequently call overseas, and those who haven't selected a preferred long distance telephone company. The cards are sold online and in stores everywhere.

The prepaid calling card industry is estimated to reach $6.4 billion in revenue in 2008. But there is a problem for phone card users. The industry is not regulated and you can't depend on getting the minutes you pay for. The Federal Trade Commission (FTC) Act exempts common carriers subject to the Communications Act from its prohibitions on unfair and deceptive acts or practices and unfair methods of competition. This exemption originated in an era when telecommunications services were provided by highly-regulated monopolies. As they testified before Congress, the FTC now believes that the exemption is outdated and endorses its repeal.

The problems arise in the fine print in the form of fees and limitations such as connection fees, periodic maintenance fees and carrier service fees. At best, it can be confusing to try to calculate how all these fees might affect your use of the calling card, and worse, it can leave the door open to deceptive practices by the issuers who set the card rates. It becomes a fairness issue ensuring you are getting what you pay for. "The bulk of the companies are legitimate", says FTC Chairman William E. Kovacic, "but the bad apples are threatening to ruin the bunch." "If consumers believe this is a bad commercial neighborhood, they'll stay out entirely," he stated in his recent testimony before Congress. Companies that try to "play by the rules" are often punished by a loss of market share due to fraudulent carriers.

The impact is significant enough that the House has passed the "Calling Card Consumer Protection Act" (H.R. 3402) and the Senate has introduced its own version, S. 2998. If passed, the final bill will require, among other things, that the FTC mandate every prepaid telephone calling card distributor to disclose certain information, including all terms and conditions regarding fees, policies on refunds, recharges, decrements, expiration, and time limitations.

Citing her two recent studies in her statement submitted to the House, University of Georgia Professor Dr. Julia Marlowe states, "With respect to fees, the fact that there is no standardization of terms, results in confusion at best and deception at worst. Only one term should be allowed for a periodic charge; however, the best solution to this problem would be the elimination of any kind of periodic fee. My question is why are there fees at all? As long as there are fees, even disclosed ones, it is impossible to state the exact number of minutes the consumer will receive. A simpler solution would be for the providers to charge more for the cards and have no fees whatsoever. There are cards available that have no fees, with the exception of using the card at a pay phone."

How to Avoid Any Problems?

* Buy dependable phone cards with no fees.

* Buy low denomination PINs and use the entire card in one call.

AT&T provides a quality, no fee card with no expiration date, though it's flat 5¢ minute rate is higher than some generic brands, such as the Fee Free card at 2¢ per minute, which will expire 90 days after the first use. If you do opt to buy an apparently lower rate calling card, do the math! Make sure you understand the rates in effect for your particular phone card and check the expiration date. Find the lowest rate phone cards, factor in all the fees and see how it compares to the no fee phone cards.

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