International callers beware. Phone cards may seem like a cheap way to make an overseas call, but it's hard to tell whether you're really getting their money's worth.
That's what our most detailed study yet of prepaid phone cards used for international calling revealed. Our secret shoppers bought over 130 cards in more than two dozen shops throughout New York state, buying them at stores ranging from bodegas to gas stations to national chains. New York state, which has a large immigrant population, is one of the areas where phone cards are most popular.
Prepaid phone cards are prevalent in immigrant communities, particularly among Hispanics. They provide an inexpensive connection to family and friends in immigrants' home countries—no credit card required. Calls can also be substantially less expensive than those made from a standard landline phone.
But our shoppers found that about three-quarters of the phone cards they bought didn't disclose calling rates. And, given the multitude of murky fees and surcharges imposed by many of the cards, being an informed buyer is nearly impossible.
What callers get can vary big-time. One card offered more than 20 hours of calling to Mexico City for $5. The Chocolate card from JTI provided only 5 minutes for $2. When we tried to call JTI's customer service number, each time we got only a seconds-long recording: "Thank you. Goodbye."
Some cards imposed fees and sapped the value of a card before we actually completed a call. Other cards listed fees and surcharges that weren't imposed when we actually called.
Among other problems:
- One company from which we bought two cards had gone out of business.
- Other cards hadn't been activated properly at the store.
- One card bought in January 2012 promoted a contest that ended two years ago.
In recent years government agencies and independent groups have charged some phone-card issuers with problematic marketing practices, such as failure to provide the full number of advertised minutes and imposing hidden or confusing fees that can sap the value of cards before they are fully used. Our 2011 report on phone cards found that cards failed to properly disclose maintenance and other fees.
Generally, you get all the minutes claimed for a card only when you use it for a single call. Otherwise, the value of the cards can be eaten up in fees and surcharges instead of actual time spent calling friends and family.
"People who purchase these cards tend to be low-income people," said U.S. Rep. Eliot Engel (D-N.Y.), who has sponsored legislation to require accurate disclosure of phone-card terms. "They should not be cheated."
But the phone-card industry defends its record. Gene Retske, executive director of a newly formed trade association of prepaid-phone-call providers, said problems tend to be "minuscule" compared to the size of the business. As recently as 2009, about $2.1 billion was spent on phone cards for international calling, according to the Telecommunications Industry Association.
"Eighty or 90 percent of the cards that are sold out there are two-dollar and five-dollar denomination cards and they're for one purpose, and that's to make one call. So the consumers typically don't have a problem with that, " said Retske.
Regular users of phone cards we spoke to had a different view, seeming resigned to the fact that many cards were going to provide fewer minutes than they advertised.
"They're going to steal something from you—it's going to happen," said Noel Godoy, 40, of Huntington Station, N.Y., who buys a $2 card about three times a week to call family back home in Guatemala. "It's kind of the risk we take."