Phonecards

What is A Pre-Paid Phonecard?

A pre-paid phonecard (telecard) is a debit card, not a credit card. You pay, in advance, and it retains the memory for telephone time to be used later. As you use the telecard, the time is deducted until it is used up at which time the card expires. Some cards are disposable and some are re-chargable.

Why Would I Want To Use A Pre-Paid Telecard?

The basic concept is to enable people to make phone calls when away from home, without the need to carry coins. This is another step towards a 'cashless' society and a Global monetary system. As the World shrinks through instant communication, methods of communication must change.

Additionally, pre-paid (debit) technology is less expensive to provide than traditional (credit) technology, therefore a less expensive product for the user. Surcharges are eliminated when the cost of the company's credit department is eliminated. There is no longer need for extension of credit, expense of collections, or losses incurred with non-payment. Losses are minimized when a 'card' is stolen, since a telecard has a limited liability as opposed to a telephone credit card.

Are There Different Types of Telecards?

Yes. There are Stored Memory and Remote Memory Telecards. Each type includes instructions for use.

Stored Memory Telecards store the phonetime memory within the card. The three commonly used techniques are 1) computer chip, 2) magnetic strip, 3) optical scan strip. They require a special telephone (e.g., yellow NYNEX phone in New York City) that can read the information stored on the card.

Remote Memory Telecards utilize a different technology. The phonetime memory is stored (remotely) in the Company's computer. The user calls a toll free (800) number to gain access to the computer, dials in a personal identification number (PIN) to identify the individual card and then dials the number to be called. A special phone is not required.

Why Are There Different Types of Telecards?

The telecard industry is evolving to meet demands for many different venues.

Local phone companies (e.g., NYNEX, BellSouth, Ameritech, US West) maintain public phone booths. it is convenient to use a public phone without carrying change. A stored memory phonecard is easy to carry in a wallet or purse and easy to use, just insert and dial. Additionally, there is no longer an incentive to vandalize a public phone. Aside from the loss of revenue, phone companies must repair or replace a vandalized phone/booth.

Long Distance Carriers (e.g., AT&T, MCI, Sprint, LDDS, etc.) have an International marketplace. It would be impractical to seek a stored memory phonecard that could be accepted by telephones throughout the World. Developed in the United States, remote memory phonecards provide a practical alternative. Access via a toll free phone number can be assured from virtually any touch tone phone in the World.

When Would I Use A Telecard?

When you are away from home and want to make a telephone call, what do you do? Most people use a pay phone with coins or use a Calling Card, which is a telephone credit card.

Coin operated phones are expensive to operate and maintain. Telecard use helps provide the service at a lower cost to the user with increased convenience.

The charge for a call by Calling Card is billed to your home phone or to a separate account with a company like AT&T, MCI, Sprint, LDDS, etc. You are paying for the actual time (which may be extra for operator assisted calls like person-to-person) plus a surcharge (approx. 80¢ per call) to support the company's billing department. A telecard is a debit card. Telecard use helps provide the service at a lower cost to the user with increased convenience.

Additionally, there are other reasons to consider:

• While staying at a Hotel: Hotels often charge an additional fee for use of their in-room telephones. They often automatically charge day-time, operator-assisted rates, even if you dial directly and don't use an operator. They often add a surcharge, up to 50% in some cases, in addition to the cost of the call. However, most hotels allow free access to toll-free numbers so you can use your telecard at your telecard rates.
• While at a friend's house: Make a phone call, your friend will not incur any cost.
• While at work: Long distance access is often limited at the workplace. Toll free access is usually available, so use your telecard.
• College students: Do you want to encourage your child to call home frequently, but don't want to pay for their other long distance calls? Telecards can be programmed to only call the numbers you want. Call home and I'll pay for it, but you're on your own for anything else.
• International travelers: Call home without the concern of exchange rates or obtaining foreign currency.
• At home: Many companies offer free phonecards as an advertising tool or promotional incentive. Many people give telecards as gifts. Use these cards since free time costs less than your home direct dial service!

 

Will A Telecard Really Save Me Money?

Telecards save money on phone calls, when used properly. The savings can be significant, up to 60% for a three minute, daytime call from New York to Los Angeles, compared to a Calling Card. The per-minute charges may appear similar for Pre-paid Telephone card, Calling Card and Coin pay calls, but there are no surcharges with telephone cards (a surcharge is a fee added onto the first minute of a phone call that helps offset the cost of operator assisted and Calling Card credit expenses). However, per-minute rates vary widely, competition is fierce. And, remember, phonecards are not meant to compete with direct dial from home. Commercials can be confusing when trying to compare different products.

What Is A Collector's Phonecard?

One of the most fascinating aspects of telephone cards is their collectibility. Like coins, stamps and sports cards, many people throughout the World collect phonecards. Germany and Japan lead the World in telecard collecting but, the US market is catching up quickly.

Phonecards are collected for their beauty, rarity, theme depicted (e.g., Disney characters, Puzzle Set, Corporate logo like Coca-Cola, Event commemorated, Show attended), Company or Country producing the card (e.g., AT&T, Telecom New Zealand, Ameritech, Landis & Gyr). Collections are organized according to individual taste: by Company, by Theme, by Edition Size, etc.

Naturally, phonecards are being produced, specifically, to appeal to collectors. Many companies offer special designs, special denominations, limited editions of small mintage, beautiful presentation folders, etc. The collector must be thoughtful and careful when choosing among the thousands of cards available:

1. Always purchase a phonecard that you like. There is never a guarantee it will increase in value. However, it is true that many cards have increased significantly in value on the collector market. A good guide is a solid company with a solid product.
2. There are many sets offered to collectors in limited editions. Generally, a smaller edition follows the normal rules of supply and demand. A card, or set of cards, may be available in regular edition for a low price, but available in a special folder, counter stamped for collectors, packaged with stamps, or packaged with a CD at a premium. Good sets have been highly sought after by collectors and many have appreciated significantly.
3. Check the per-minute rate. Time tends to be more expensive (50¢ to $1 per minute) on collector cards. For example, it may be necessary to pay royalties to a celebrity whose picture appears on the card or to support an Interactive platform where more than phone calls are available. Something to be aware of when comparing rates among 'user' cards.
4. Collector cards tend to come packaged, sealed, in envelopes, with scratch-off PINs, etc. These may be cards to keep intact and not use the time. Be aware that it is debatable whether keeping a card in its envelope or opening it, using or not using the time on it enhances or destroys the "collector value" of the card. Most agree, however, that a card with scratch-off PIN is worth more with scratch-off intact (i.e., never used).
5. Carefully evaluate the producer of the phonecard. Some companies are here today, gone tomorrow. Several rarities (and hence expensive cards) have been created by companies going out of business, but many more have simply become worthless. Be aware that when a company goes out of business, the phonetime backing the card expires.

 

What About All Those Companies?

There are many Companies producing phonecards. When choosing a phonecard to use, evaluate the Company behind it. Choose one with a good track record, a reliable supplier of phonetime, a credible product. When a deal sounds too good to be true, it usually is. A phonecard with time significantly below the industry average (e.g., 18¢/min) may mean financial difficulties and an inability to pay the bills (If the Company goes out of business, the phonetime backing the card is lost) or a lack of support services (e.g., 24 hr customer service) in an effort to cut corners. Beware of regular phonecards that are not labeled with their cost and/or time provided (you should not have to open a sealed card to know what you are paying for). Collector packs may be different, however, due to the nature of the special presentation folder.

What If I Need Help Using My Telecard?

Telecards should contain complete instructions on their use. Telecard Companies should provide 24 hour/day customer service to help with phone call problems. Check on these prior to purchase.

What Happens When My Phonetime Runs Out?

Many cards are disposable when the time runs out (but the wise person keeps the card for its collector value). However, many offer a way to purchase additional time, usually by charging the additional time to your credit card. Advantages include:

• No need to purchase a new card, which may require an activation fee.
• Many companies offer lower rates upon renewal. It is less expensive for the Company to re-charge a card rather than manufacture and sell a new card.
• You won't be cut off during an important call. Instead, your call will be held and you will be offered the opportunity to add time.
• Eliminates the concern of having a little time left, but not enough for the call you want to make. The time remaining won't be wasted, it will be added to.

Most companies now offer automatic renewal. You will never run out of time and your conversation will never be interrupted to offer additional time since additional time will automatically be added and charged to your credit card at a predetermined level.

Can I Give A Phonecard As A Gift?

Absolutely. Phonecards make perfect gifts, especially for the hard-to-buy-for friend or relative. It can be difficult to find a useful gift, but most people make phone calls. Whatever rate your friend or relative pays for their long distance service is irrelevant, since free time is still free. Telecards can be used from virtually any touch tone phone.

Do Telecards Have Other Uses?

Phonecards are one of the most versatile products around:

Advertisement. Customize the front of the card with your own design. Suggestions include your business logo, business card, business artwork, or photo of your product line. Every time you give a card to someone, you are giving a 'mini-billboard' that advertises your company. Each time they use the card, they will think of you and your product. And don't forget the people that are looking over their shoulders!

Promotion: Give a phonecard (customized if you like) as an incentive to valued employees, as a thank-you, to publicize an upcoming event or campaign, to commemorate an event, as an invitation to an event (with a built-in way to RSVP). The possibilities are only limited by your imagination.

Fund Raiser: Phonecards can be customized with the logo or insignia of your favorite charity and then sold to raise funds for the organization. An attractive, new alternative to the traditional fund raisers. Not only will the organization realize a profit upon the initial sale/donation, it is possible to choose a company that will continue to donate a portion of the time renewal fees to the organization (residual income).

 

What's Next?

The newest product in the pipeline is the stored value 'Cash Card' being developed by VISA. This is a device that, like a telecard, is pre-paid, but, unlike a telecard, will be accepted by selected merchants that accept the VISA credit and debit cards for product purchases. Eventually, you will be able to add cash to your card via your Bank ATM machine. Watch for details in your area and our new Guide to Stored Value Cards coming out in early 1997.

This material was prepared by and represents the opinions of KARS Unlimited.