Whether you buy those prepaid calling cards for credit or for calls to far-flung places, smart consumers will be aware of the good news and bad news when it comes to their use that should make them think twice before buying.
In both cases, it’s a matter of caveat emptor. What the consumer gains in convenience, control and safety from prepaid calling cards (as an alternative to cash or vouchers for gifts, for example), he or she may be losing in other areas.
The big issue?
Even when disclosed, reading all that fine print can be daunting…and therefore, many skip that step before purchasing. But here’s why that can be a mistake. The fees can add up, big-time and fast.
One Vancouver area teenager recounted to the Vancouver Sun her experience with a $50 prepaid Mastercard, issued by an area bank, that had been a Christmas gift. She put it aside, only to use it months later to find that a $4 monthly maintenance fee had substantially drained its value.
It’s the issuer, like banks and other financial institutions, that set the fees – not necessarily the card brands like Mastercard and Visa, as a Visa spokesperson told the Sun. They can be assessed on activation, for transactions and for maintenance if they’re not used. Then, too, there may be fees on purchases, and for taking cash out, along with a fee for redeeming funds that might be left on the card. And if do you leave home with it (for trips abroad), those fees will likely go higher.
It’s not just the fees that make prepaid cards warrant a second look. Prepaid cards aren’t credit cards, so typical credit card purchase protections don’t apply. Nor are they debit cards associated with your bank account, so money loaded in them is neither protected nor earning you interest. Plus, they don’t work for all transactions as a pre-authorized card would – a security hold on a hotel room, for example – which can put limits on their usefulness.
Prepaid phone cards have a different value proposition, of course, but can be even more daunting than prepaid credit cards.
Over the years, prepaid phone cards have become prevalent with the immigrant community, serving as an inexpensive and convenient way to connect with friends and families in the consumer’s home countries. However, prepaid phone cards have shown an inconsistent range of fees, surcharges and great variations in costs and per minute charges. Other factors can eat up the calling time that’s been paid for – like bad connections, access numbers that are always busy, or PINs that don’t work.
MTI Magnolia Telecom, a global provider of a range of phone and digital network services that includes providing prepaid calling cards, tells consumers to be mindful of such variations and to study card issuers’ promotional materials to ensure they are getting what they expected.
Among the major red flags, MTI Magnolia Telecom points to:
- The kinds of fees assessed that can affect the card’s value, like disconnect or hang-up or maintenance fees.
- An expiration date for minutes.
- Whether the advertised minutes apply to a single call or multiple. (Some cards lose value after one call, regardless of minutes advertised.)
- Do advertised minutes apply to international calls to a cell phone? (Some charge higher per-minute rates for such calls.)
- Does the issuer provide a toll-free customer service number?
Such precautionary measures help protect the user, according to MTI Magnolia Telecom. But, the company also recommends testing the service first with a small denomination card (like $2) to keep the risk loss minimal.