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Theyíre compact, colorful, and collectible. Theyíre given away as mementos at political conventions, stuffed into boxes of bran cereal, and pasted on bags of fertilizer. Theyíre available in a dazzling array of designs that can range from the sublime (Ameritechís "Claude Monet" collectibles) to the silly (MCIís "Dilbert" series).
      The question is, are prepaid long-distance phone cards merely marketing gimmicks?

To be sure, about 45% of phone cards are promotional freebies or snapped up by collectors. But during the past year, the biggest growth in this $2 billion industry has come from sales to consumers whoíve discovered that prepaid cards are a convenient and relatively inexpensive way to make long-distance calls away from home and office.
      Five years ago, few people had heard of phone cards. Today, you can buy them at gas stations, supermarkets, discount stores, post offices, airports, and on the Internet. Collectors have magazines, newsletters, auctions, and on-line sites such as the Phone Card Market Report.
      Travelers make up a large share of phone-card users. But cards also are finding a niche among the as many as 30 million Americans who donít have access to a long-distance carrier, says Howard Segermark, executive director of the International Telecard Association, Washington, D.C.
       Deciding which phone card to buy can be a major headache. New issuers continually enter the market, pricing is all over the board, and consumer protection is spotty at best. Here are several questions you should ask, and answers that can help you make a safe and informed purchasing decision:
      Pricing is
      all over the board,
      and consumer protection
      is spotty at best.

Whatís a prepaid phone card, and how does it work?
A prepaid phone card is a type of debit card. You pay in advance for a set amount of long-distance minutes. The telephone carrier subtracts the length of each call you place using the card from the total until the card is "dead."       Phone cards come in two flavors. The first has an internal memory, from either an encoded magnetic stripe or an integrated circuit chip; you must swipe it through electronic readers on specially equipped phones.
      The second, and by far more common type, uses a remote computer to track calls. To access the computer, you dial a toll-free number from any Touch-Tone phone, enter a personal identification number (PIN), then dial your party. Both the toll-free number and PIN are printed on the back of the card. Voice prompts lead you through the process and indicate how much time remains on a card.

How much does a phone card cost?
Phone-card prices run the gamut from a few dollars to more than $100, and offer from five minutes to several hours of phone time. When comparison shopping, be sure to calculate per-minute rates. To do this, divide a cardís price by its minutes (or units). For example, a $15 card with 60 minutes of calling time charges 25 cents a minute ($15 ų 60 = .25).
      Typically, you pay the same flat rate (25 cents, for example) no matter the time of day or where youíre calling from within the U.S. Per-minute rates vary from 15 cents to more than 50 cents, with the average being about 25 cents, according to Atlantic-ACM, a Boston-based strategic consulting firm.
      Other fees--often unadvertised--sometimes come into play, including state tax, activation fees, and surcharges. Watch out for companies that begin calculating charges before you make your connection. International calls and calls to Alaska and Hawaii may cost two to three times more than other domestic calls.

Whatís the difference between a prepaid card and a calling card?
A calling card is a form of credit card--you phone now and pay later. Average prepaid phone card rates are competitive with daytime long-distance rates for calling cards or collect calls. As long as there arenít additional charges, however, using a prepaid phone card often is less expensive than using a calling card or calling collect. Thatís because calling cards usually levy a surcharge that can add up to 90 cents; collect-call surcharges range from 95 cents to $2.30.
      For long conversations, however, a calling card may be a better option. First, the longer the call, the less the surcharge affects the overall bill. Second, depending on your phone carrier, you might be able to take advantage of special weekend or nighttime discounts. And third, you donít have to worry about running out of time.
      Prepaid cards do provide a security advantage: When a card is lost or stolen, you lose only the balance on your card. A lost calling card may cost the owner untold dollars in unauthorized charges.

What happens when my card runs out of time?
Most phone cards are disposable. But many issuers now market "rechargeable" cards, which enable consumers to restore a cardís value either by credit card or a cash payment at the point of sale. Some issuers even will combine the remaining few cents from several cards onto a new card.
      If you canít find a rechargeable card, estimate how much calling time you need and buy the appropriate number of minutes. Beware, though, that most cards expire within six months to a year after purchase. What you donít use, you lose.

Donít pay
a premium rate
for unnecessary fluff.
Do prepaid cards provide other benefits?
Bells and whistles abound in this competitive industry. Companies offer fax, messenger, and voice-mail services. You can get the latest weather, sports scores, or your horoscope. Others offer additional free calling time if you participate in marketing surveys. Some cards even offer free merchandise. Just make sure youíre not paying a premium rate for extras you donít really need.
      Some phone cards are worth far more than the plastic theyíre printed on. In collectorsí circles, a card given away at the 1992 Democratic National Convention can fetch $1,000 or more. A cardís value depends on condition and rarity. Phone Card Market Reportís Web site provides helpful information and links for both novice and seasoned collectors.

How can I be sure a card issuer is reputable?
Many phone-card companies have folded, either through mismanagement or fraud, leaving customers with worthless plastic. If youíre wary about buying from an unfamiliar issuer, stick with a company you know. Otherwise, experiment with the issuerís lowest-priced card.
      Although thereís very little phone-card regulation, Florida has drafted regulations subject to approval by the stateís public service commission. Several other states also have regulations in development.
      In the meantime, look for cards that provide the following information: the issuerís name, a phone number for 24-hour customer service, the expiration policy (if any), and additional charges. Tamper-proof material should conceal the PIN on an unused card. For extra security, buy cards that arenít operational until the merchant activates them by using a special scanner at the point of sale.

Whom do I contact if thereís a serious problem with my card?
If youíre having problems with a card, try to work it out with the issuer. If that fails, contact your local Better Business Bureau or state telephone utility regulatory agency. When dealing with out-of-state businesses, file an informal complaint with the Federal Communications Commission. The International Telecard Association addresses concerns and questions through its consumer hotline, (800) 333-3513.

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