Calling-Card Fees Aren’t Necessarily Pocket Change

Pat Mooney didn’t pay close attention to the way his phone company assessed long-distance charges, until one day he happened to notice an odd pattern on his bill.

There were three calls--all to the same place, during roughly the same time of day and for precisely the same amount of time. One call cost 15 cents but the other two cost 73 cents each. That’s when Mooney learned about the surcharges that are assessed when consumers use telephone calling cards.

Today, the only unusual thing about Mooney, a marketing consultant from Torrance, is that he knows that he pays a surcharge when he uses most companies’ calling cards. As a result, he uses his calling card less frequently.

Most people don’t know about the minimum charges, according to a survey by Kansas City, Mo.-based Sprint Corp., which did the study in part to draw attention to its decision to eliminate calling-card surcharges. Analysts said the move may be part of a strategy to gain market share as it competes with industry leaders AT&T; and MCI, which have surcharges, and smaller long-distance carriers that have had flat-rate calling-card plans for several years.

In fact, although nearly two-thirds of all American households have and regularly use telephone calling cards, 53% don’t know they pay flat minimum surcharges, or “usage fees,” according to Sprint. That’s because calling-card surcharges are hidden--folded into per-minute charges that no one appears to understand.

However, for anyone who uses a calling card frequently, these usage fees--which range from 45 to 80 cents per call--add up to more than small change. Telephone calling-card numbers, first introduced in 1939, allow you to bill calls made away from home to a particular phone number. Today, long-distance and local phone companies both offer the cards. More recently, prepaid phone cards have become popular.

The calling-card business is now a $13-billion industry, and surcharges alone account for about $1 billion of that total, says Wally Meyer, vice president of sales and marketing for Sprint’s consumer services group.

Consider what happens to a college student who makes an average of two calling-card calls each day with AT&T.; In addition to regular per-minute phone charges, she gets dinged 80 cents every time she uses the calling card. The bottom line: $48 of her monthly phone bill is calling-card surcharges. That’s $576 a year. (Because she spends so much on phone calls, she could sign up for AT&T;’s most advantageous discount calling plan, which would cut her phone bill by 25%. Nevertheless, she would still be spending more than $400 a year on calling-card usage fees.) Indeed, for those who make frequent short calls, the card usage fees vastly overwhelm the per-minute line charges.

MCI, for example, has a flat-rate calling plan that charges 15 cents per minute no matter where or when you call. But it also imposes a 79-cent surcharge when you use a calling card. So a one-minute call costs 94 cents--about five times what it would cost if you didn’t use the calling card.

The same holds true for those who use LCI International, which is the nation’s sixth-largest long-distance company. LCI’s calling-card usage fee is less--just 45 cents. Although LCI bills telephone time in six-second increments, which keeps the average cost of a call lower, the service charge is still significant. The big three--AT&T;, Sprint and MCI--round charges up to the nearest minute.

Consider what happens if the student uses an LCI calling card to phone home one evening and gets the answering machine. She leaves a brief message and is charged for just 30 seconds of line time, which costs 9 cents. But because she used a calling card, the final cost of this call will be five times more--54 cents.

Sprint, which has had tremendous success with flat-rate calling programs, eliminated its calling-card surcharges altogether. However, it boosted the per-minute rate for night calls.

In the past, Sprint would have hit you with an 80-cent surcharge on calling-card calls, which would be tacked onto a 25-cent per-minute daytime rate or a 10-cent per-minute evening rate. Now ordinary calling-card calls are all charged at 25 cents per minute, but there are no surcharges, Meyer says. The end result: Sprint is much cheaper for short-duration calls but can be more expensive if you spend the evening chatting it up. (Sprint also has a few specialized calling plans in which the per-minute charges can be less.)

To be specific, a one-minute daytime calling-card call from Los Angeles to Kansas City, Mo., costs just 25 cents with Sprint, compared with 81 cents (assuming the most advantageous discount) with AT&T.; But, an evening phone call that lasts an hour would ring up $15 in charges on Sprint’s calling card compared with $9.79 with MCI and $11.60 with AT&T.; And the MCI and AT&T; rates would be even lower if this caller subscribed to one of these firms’ discounted calling plans.

In the end, frequent users of calling cards who don’t mind going a little out of their way can reap substantial savings by carefully monitoring their long-distance calling. Just as an increasing number of consumers have opted to get two types of credit cards because of wide disparities in rates and fees, frequent users of calling cards might be wise to do the same.

Then, when you know you’re making a short call, pull out the no-surcharge card. (Be careful, though, Sprint charges 35 cents a minute to calling-card holders who aren’t regular long-distance customers.) But, when you’re feeling long-winded, use the card that offers the best per-minute rates.

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Comparing Costs

Sprint’s move to eliminate telephone calling-card surcharges allows frequent phone-card users to save by using different phone cards for different types of calls. Be aware, however, that although Sprint charges just 25 cents per minute for calling-card calls when you’re a long-distance customer, noncustomers who just use the calling card get billed at a 35-cent-per-minute rate. Here’s how calling-card costs stack up for a day and evening calling with four of the major phone carriers, with calls lasting one, 10 and 30 minutes:

Daytime

*--*

One minute 10 minutes 30 minutes AT&T;* $1.08 $3.60 $9.20 MCI* 0.94 2.29 5.29 LCI 0.70 2.95 7.95 Sprint 0.25 2.50 7.50

*--*

Nighttime*--*

One minute 10 minutes 30 minutes AT&T;* $0.98 $2.60 $6.20 MCI* 0.94 2.29 5.29 LCI 0.63 2.25 5.85 Sprint 0.25 2.50 7.50

*--*

*AT&T;’s rates are not discounted here. However, discounts of up to 25% are available to those who make more than $5 in long-distance calls each month; MCI Communications’ rates listed are for the company’s MCI-One flat-rate calling plan.