FTC FACTS for Consumers

FOR THE CONSUMER 1-877-FTC-HELP

ftc.gov FEDERAL TRADE COMMISSION

PRODUCTS

Buying Time: 

The Facts About 

Pre-Paid Phone Cards

P re-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 prepaid 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. 
Facts for Consumers 

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 tollfree 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 cardholders 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. 
Facts for Consumers

• 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 ftc.gov 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 fraudrelated complaints into Consumer Sentinel, a 

secure, online database available to hundreds of 

civil and criminal law enforcement agencies in the 

U.S. and abroad.
Facts for Consumers

1-877-FTC-HELP FOR THE CONSUMER

FEDERAL TRADE COMMISSION ftc.gov

March 2006

Federal Trade Commission

Bureau of Consumer Protection

Office of Consumer and Business Education

The Federal Trade Commission (FTC) is the 

nation’s consumer protection agency. Here are 

some tips from the FTC to help you be a more 

savvy consumer.

1. Know who you’re dealing with. Do business 

only with companies that clearly provide 

their name, street address, and phone 

number.

2. Protect your personal information. Share 

credit card or other personal information 

only when buying from a company you know 

and trust. 

3. Take your time. Resist the urge to “act 

now.” Most any offer that’s good today will 

be good tomorrow, too. 

4. Rate the risks. Every potentially high-profit 

investment is a high-risk investment. That 

means you could lose your investment — all 

of it. 

5. Read the small print. Get all promises 

in writing and read all paperwork before 

making any payments or signing any 

contracts. Pay special attention to the small 

print. 

6. “Free” means free. Throw out any offer that 

says you have to pay to get a gift or a “free” 

gift. If something is free or a gift, you don’t 

have to pay for it. Period. 

7. Report fraud. If you think you’ve been a 

victim of fraud, report it. It’s one way to 

get even with a scam artist who cheated 

you. By reporting your complaint to 

1-877-FTC-HELP or ftc.gov, you are 

providing important information to help law 

enforcement officials track down scam artists 

and stop them!