just sat down to a nice family dinner and what happens? A
telemarketer calls and asks you if you want to save big money
on your long-distance bills, to which your response is
probably one of the following:
To immediately hang up
To say, "Of course not -- I am always trying to find
ways to spend all of this money that keeps piling up at my
house! Paying too much for long distance is one of the best
methods I have found to get rid of it!"
To listen and hear about the deal -- How much money are
they going to offer you to switch? What is the price per
minute? What is the monthly fee?
If you do actually
listen to the deal, can you even trust what they tell you? Are
they giving you the details you need to make a good decision?
In this edition of HowStuffWorks,
we'll uncover some of the big long-distance scams that
can trip up even the most alert long-distance shopper. We'll
explain what all of those charges on your bill mean and how
companies like SmartPrice.com
can help you find the best deal for the types of calls you
What Makes Up Your Long-Distance
Charges? One of the most confusing things about your
long-distance phone service is the fees that are
charged in addition to the actual charge for your calls.
Understanding these charges and how they are calculated will
help you avoid paying more than you should be for your long
For example, you may sign up for a $0.07-cents-a-minute
long-distance rate and be pretty pleased with your negotiation
skills, but is that really what you'll be paying? Did you read
all of the fine print? Did you ask the right questions? There
are many things that apply when your long-distance charges are
computed. Here are a few things to make sure you ask about and
In-state verses out-of-state
calls You get a great offer of $0.05/minute from
long-distance carrier, but do you realize that the rates that
are advertised are typically the rates for state-to-state
calls only? The long-distance carrier may make that fact
obvious, but more often than not this fact is obscured. You
have to read the fine print and ask specifically what
long-distance calls within your own state will cost. In-state
calls are usually anywhere from $0.08 to $0.13 per minute from
most carriers. A few may have better deals though, so if most
of your calls are made to locations within your state, make
sure you ask specifically about in-state rates.
Monthly service fees You
got a $0.07-per-minute rate and feel pretty good about it.
However, there's a $4.95-per-month service charge that you
have to pay to get the rate. Is that a good deal? Maybe, maybe
not. The important question: How many calls do you make? Let's
look at an example.
Let's say that you average 150 minutes of long-distance
yakking per month. If you are getting a $0.07-per-minute rate
with a $4.95 service charge, then you're actually paying a
little over $0.10 per minute:
Of course, the more you talk, the more you save... or, at
least the lower your per-minute cost will be. The key is
knowing your calling habits.
Per-minute fees Other
aspects that can affect that per-minute fee are things like
minimum call length, minimum total long-distance charges,
time-of-day rates and billing increments. Let's see how those
Minimum call lengths Let's
say you get an advertisement for a long-distance service that
says you pay $0.10 per minute for calls. You assume (as would
most of us) that this means a three-minute call would cost
$0.30. But with some carriers, there is a minimum call length
in order to get the quoted per-minute rate. You might be told
you get $0.10 per minute, but in the fine print it states that
there is a $0.50 minimum-call charge. If you get someone's
answering machine and hang up after leaving a 20-second
message, you're still paying $0.50 for the call.
amounts You may even have a minimum amount you
have to pay in calls each month. For example, some
long-distance carriers require a minimum in long-distance
calls of anywhere from $20 to $30 per month. You pay this
amount even if you don't make ANY long-distance calls.
rates Typically, long-distance carriers break up
the day into two rate periods. From 7 in the morning until 7
in the evening is considered the "peak" period and gets
the highest charged rates. From 7 in the evening until 7 in
the morning is considered "off-peak" and gets the
lowest charged rates. There may also be different rates for
weekends and weekdays. Just because they say
$0.07 a minute doesn't mean you'll get that rate around the
clock. This might vary with long-distance carriers, so make
sure you know when the best times to call are.
increments How long is a minute,
anyway? Sixty seconds? Sometimes it is, sometimes it isn't.
Check with your long-distance carrier to see what billing
increment they use for calculating the length of your
long-distance calls. If it's a 60-second interval, then a
second minute is billed if you talk for 61 seconds. If it's a
30-second interval, then one minute is charged if you talk for
31 seconds. If it's a six-second interval, then a full minute
is billed only after you've talked for 55 seconds. (If you are
connected for 30 seconds, you're only billed for half a
minute.) From this, you can see that it is obviously better to
look for a smaller increment.
Fees and taxes Your
long-distance carrier also has the option of passing on some
fees to you. We talk about these fees later in
this article, but here are some that are linked to your
long-distance bill and are not regulated in the amount that
can be charged to you. Make sure you check with the
long-distance carrier to see what it charges its customers for
The Presubscribed Interexchange Carrier Charge
(PICC) is a charge that the long-distance carrier has to pay
the local telephone
company for providing the phone systems to its customers.
(PIC -- Presubscribed Interexchange Carrier -- is the term
the industry uses to refer to a long-distance carrier.) The
PICC is usually $1.04 per month, but there is no law about
how much it should be, or if it has to be charged at all.
Some long-distance carriers don't charge the fee to their
customers at all, and some more than double the fee.
The Universal Service Fund Charge (USF) is
another charge that you may or may not see on your
long-distance bill. This charge, which is used to help
provide phone service to rural areas, low-income customers
and others, is usually a percentage of your out-of-state and
international long-distance charges. The typical amount that
long-distance carriers charge is 6 percent, but once again,
they can charge anything they want.
Some Well-known Scams Let's visit some of
the most well-known long-distance scams. Maybe "scam" is too
strong of a word -- let's call them "purposefully confusing"
deals. The source of discomfort is the hidden restrictions
that long-distance companies often apply to boost their rates.
Unless you read the fine print, and ask questions when it says
"ask about restrictions," you may feel as if you've been
scammed, but the company is protected because the information
was there (you just didn't see it). If, however, a company
blatantly makes a statement that goes against the actual
offering, you may have a case for the FCC.
Some of the techniques long-distance carriers use to lure
you over to their services actually are good deals. You just
have to make sure you find the good ones. Watch out for:
Companies sending you a check in the mail to
encourage you to switch - You can cash the check, and in
doing so it automatically switches you to their service
whether you call them or not. However, rather than signing
up for a plan that gives you a great rate, you get signed up
for the basic plan that charges you as much as $0.25 a
minute. You have to call to get the advertised plan.
Companies using old competitors' rates in their
comparison charts - Make sure you verify the rates they post
for competitors to make sure those competitors aren't
offering a better deal now.
Getting a free prepaid calling card that
automatically switches you over to their long-distance
service if you use it - Sometimes you do have to call to
establish the service and get a code to use with your card,
but not always.
Companies offering promotional rates - Are the
rates good forever, or will you be charged a higher rate
after three months? Is there no monthly fee forever, or will
it kick in after the promotional period is over?
The minimum call length that we talked about in
the last section - You may get a great rate for calls over
the minimum length, but if you don't reach the minimum
you'll be paying very high rates. You never realize how many
short calls you make until you see all of those charges on
your phone bill.
Time restrictions for the rate you've been
promised - Restrictions may not be obvious. It may be that
the rate you get is only good at night. Does that fit your
calling pattern? Make sure you know when you'll get the good
rate and when a higher rate will kick in.
Using a special directory assistance company that
advertises a flat rate for the service with no additional
charge to connect the call - This may sound like a great
deal if you have a good per-minute rate with your
long-distance carrier. What you don't notice, however, is
that by calling the special number for the
directory-assistance deal, you're approving having the call
connected and charged using that carrier's long-distance
service, which is billed at a much higher rate than your
regular carrier. The text "basic rates apply" might
be the only statement you see that can tip you off that this
is the practice of a long-distance carrier illegally switching
your long-distance service to its own plan without your
knowledge. Slamming is the single largest source of complaints
filed with the Federal Communications Commission (FCC), and
the practice is still increasing. Most consumers don't even
notice that they've been slammed, because they don't look very
closely at their phone bills to see whom they are paying.
Slamming can happen without you doing anything, or it can
happen when you enter a contest or respond to offers for free
gifts. If you don't read the fine print, you may be
authorizing a long-distance carrier to switch your service
when you sign your name.
To protect yourself from being slammed, call your local
phone company and ask for a "PIC" freeze. A PIC
(Presubscribed Interexchange Carrier) is what the telecom
industry calls your long-distance carrier. When you freeze
your PIC, you are requesting that your local phone service not
change your long-distance carrier unless you specifically call
them and authorize it. There is also password
protection to help ensure that someone else doesn't call
to authorize the change.
If you've already been slammed, there are some steps
you can take to correct the problem.
Call your local phone company and tell them you have
been switched to another long-distance carrier without
authorization. They should be able to switch you back and
should not charge you for the switching service.
Call your long-distance carrier -- the one you thought
you had, anyway -- and request that they return you to
the same plan you had before. Again, there should be no
charge for this.
Call the long-distance company that slammed you and tell
them to remove all charges for the past 30 days from
your bill. You will have to pay for calls made more than 30
days prior to your noticing you had been slammed, but you
will pay them to your original long-distance carrier at
If the company who slammed you won't remove the charges,
then file a complaint with the FCC.
If you notice you've been slammed after you've paid the
bill, then the slamming long-distance carrier will have to pay
your original long-distance carrier 150 percent of the
bill. You'll be reimbursed that extra 50 percent by your
original long-distance carrier.
Some states require that long-distance carriers use
Third Party Verification (TPV) to verify that the
customer is actually requesting that his or her service be
switched to another long-distance carrier. The TPV will call
you and ask you to confirm that you wish to switch your
You can always periodically check to see who your
long-distance carrier is by calling 1-700-555-4141 from
your home phone. To find out who your local phone service
provider is, call 1-your area code-700-4141.
involves illegally putting unknown and unexplained charges on
your bill in the hope that you won't notice them, or will pay
them anyway. This type of fraud can be club memberships,
service programs, or simply vague, generic-sounding charges
like "service charge." You may never use or receive the
service or product, but you are charged for it. How do these
charges get on your phone bill? There are a number of ways.
Let's take a look:
Contest entry forms can bury their true intent in
the fine print that no one reads or could comprehend if they
did read. By signing and listing your phone number (so they
can call you when you win!), you'll be authorizing them to
bill you for their "service" or "membership," which you've
probably never seen or heard of.
Direct mail sweepstakes are another way that your
name and number can be captured and used in this type of
scam. You may get a notice in the mail about a sweepstakes
and instructions to call a number to see if you've won. This
may automatically enroll you in a service that you don't
want, but will be billed for on your phone bill.
Free calls via 800 numbers, like those for
psychic services, or adult entertainment, request that you
state that you "want the service" in order to get through to
the psychic. This statement is recorded and used to enroll
you in a service, club, or other type of billed program. You
never receive anything -- probably not even the psychic
reading -- and are billed on your phone bill for the
Instant calling cards are access codes that
reference your phone number and charge paid calls for adult
entertainment to your phone bill. This may come about when a
visitor (or family member) uses your phone to call an 800
number for an adult service. The person is given the code to
use for future calls, and the code charges back to your
phone number, not the caller's.
Dating services may also be a way of scamming
unsuspecting people. When you call the service to talk with
your date, you are told that your date will call you back
and you'll need to enter a code to be teleconferenced. These
charges are billed to your phone number and are usually
mislabeled as collect or toll charges from other cities.
To protect yourself from cramming, always review your phone
bill for unknown charges. If you find charges you can't
identify, contact your local phone company and find out how to
dispute the charge.
Request that a 900 number block be placed on your
Don't respond when a recording requests that you
state "yes" or "I want the service."
Don't enter codes into your phone unless you know
what they are for and know it is a trusted source.
Always read the fine print when you register for
a contest or sweepstakes.
If you think you've been crammed, call the company who
placed the charges on your bill and try to get an explanation.
If they are charges for services or products you did not
authorize, ask them to remove them. Then, call your local
phone company and report the incident. They should be able to
help you get the charges removed. File a complaint with the
FCC if you can't get any cooperation. Or, you can contact your
10-10-XXX: Dial-around Services
Exposed! Dial-around services are one of those
services you see advertised that tell you to dial "10-10" and
then three more numbers to bypass your regular long-distance
carrier and save money. What they don't tell you is that you
may not save any money at all; in fact, you may spend more for
your long distance.
While not every dial-around service is out to scam you,
some are, and you should be aware of how they operate. The
catch with dial-around services is sometimes hard to figure
out. Here are some examples of things to watch out for.
Many times, the discount or advertised price only kicks
in after you've talked for 10 or 20 minutes. Until then,
you'll be paying extremely high rates for a short call.
They may say that they offer a 50-percent savings over
"basic" long-distance rates. That may still be higher than
your existing long-distance carrier charges because you
probably aren't subscribing to the "basic" service.
They may advertise a 20-minute call for $0.99. What they
don't tell you up front is that any call under 20 minutes is
$0.99, so even a one-minute call costs $0.99.
They may advertise $0.10 per minute. What they don't
tell you up front is that there is also a $0.10 fee for
every call, so even a one-minute call costs $0.20.
They may advertise $0.09 per minute on evenings and
weekends, and $0.20 per minute for weekdays. What they don't
tell you up front is that they also charge a 4.8-percent
surcharge on all of your calls for the Universal Service
Fund (USF), which is probably also charged by your regular
They may advertise $0.05 per minute for the first 60
days, and then $0.07 per minute thereafter. What they don't
make obvious is that there is also a $4.95 service fee and
$1.49 USF charge each month.
As you can see, you really have to ask questions and read
all of the literature about these types of services. They can
be a good deal in some instances. Just make sure you find out
Monthly service fees
Minimum call lengths
USF and other surcharges
Restrictions and rate differences based on the time
There may also be restrictions from your
regular phone service. For example, some wireless
phone contracts don't allow dial-arounds or phone-card
Calling Cards Beware!
cards Prepaid calling cards are those
cards you see being sold everywhere that give you $5 to $50
(or more) worth of long-distance calls. You buy the card and
use it with any phone to make long-distance calls. The card
has a toll-free access number that you dial when you
want to make a call. You then enter a Personal
Identification Number (PIN) that activates the card's
account in the company's computer system. You'll then be
prompted to enter the number you wish to call. It may be a lot
of numbers to dial, but if you do your homework you can save
The retailers that sell these prepaid cards are just one
player in the game. There are actually many players.
There is the long-distance carrier who sells
blocks of time to resellers.
These resellers sell to or work with card
issuers who set the card rates, set up access numbers,
provide customer service, and maintain the PIN numbers and
Distributors and retailers then sell the
cards to their customers.
You won't usually know who the long-distance carrier is
behind your card.
The price per minute with prepaid phone cards varies
greatly, as do the number of additional fees that might be
involved. The card may advertise that you can talk for 120
minutes, but that may be under very specific circumstances.
While there are certainly cards that are good deals, and the
convenience of the cards is perfect for some situations, there
are still a lot of scams out there that take advantage of
Unadvertised (or non-obvious) activation or setup
These fees eat into the total dollar value
of the card, making that 120 minutes you think you're getting
turn into a lot fewer. If you made a single call for 120
minutes, perhaps you would get the advertised deal. Making
several shorter calls that each racks up connection fees and
builds up higher charges because of the minimum call lengths,
however, will result in getting far fewer minutes for the
Some other things to watch out for with prepaid phone cards
the type of card you use, if you use a pay phone
you'll be using an Operator Service Provider
(OSP) -- the long-distance service provider for pay
phones. Unless you dial a special number to connect to
the long-distance carrier of your choice, you'll be
billed at that OSP's long-distance rates. AND, even if
you use a calling card, if that card includes your
phone number as part of the card number, the OSP may
be able to bill you for the call at its rates.
The only way to be sure you'll be connected with
your chosen long-distance carrier and billed at its
rates is to follow the directions on the pay phone to
call a different long-distance carrier. These
directions are required by the FCC, so every pay phone
should have them prominently displayed.
Pay-phone fees - In addition to the per-minute
charge, connection fees and any other charges you may be
paying, if you make your call from a pay phone you should
expect to pay an additional surcharge. While the FCC
approves an extra charge, card issuers vary greatly in the
amount they charge.
Large billing increments - These can be as high
as five-minute increments, meaning that even calls under
one minute use five minutes of the card's value. Any
call less than 10 minutes, but more than five minutes, uses
10 minutes of the card's value.
Delivery charges - If you order your card from
or another source, you may also be charged a delivery
charge. You also stand the chance of not receiving your card
or not receiving a valid PIN.
No quality guarantees - Look for quality
guarantees, as well as contact information for any problems
you may have.
Invalid PINs - There have been instances of PINs
that don't work.
Card issuers that go out of business - This makes
your card useless and gives you nowhere to go for a refund.
Minute usage beginning as soon as you dial -
Logically, you would think it would begin when a connection
is made, but sometimes it doesn't.
Busy access numbers - If you can't connect to the
access number, you'll never get through to make the call in
the first place.
Instant calling cards - These services allow you
to purchase the card online, get an access number and PIN
and begin using it right away. While this can work fine and
be a good deal, you may also find that buying a prepaid card
this way leads to more problems with PINs not working or
cards never being received.
According to the Federal Trade Commission (FTC), there are
four questions you should always ask before you buy a prepaid
What is the connection fee for each call?
Is there a service fee?
Is there a maintenance fee?
Is there an expiration date?
In addition to these questions, you should make sure that
you have a valid customer service number.
Call the International Telecard Association at
1-800-333-3513 to request an informational brochure.
Billed calling cards These
cards specifically for making long-distance phone calls.
Rather than paying for the calls upfront like with the prepaid
calls, you pay on a monthly basis after you make the calls.
You can usually get a calling card through your existing
long-distance carrier, or through a different carrier. Some
carriers do require, however, that your residential or
business's long-distance service be through a specific carrier
that they are usually affiliated with. Or, they may be
restricted to certain geographic areas. Like your regular
long-distance service, you need to carefully examine each
carrier's rates, charges, restrictions and everything else
we've discussed here.
There might be:
A minimum monthly amount
Different rates for different times of the day
Surcharges for pay phones
A per-call surcharge
These types of cards are
sometimes considered safer than their prepaid cousins. Since
you're not paying for something you haven't received yet,
you're not taking as much of a risk. If the service is through
your existing long-distance carrier, you're also dealing with
a known, rather than an unknown.
How to Cut Through the Fluff So how do you
know if you're getting the best deal with all of the rates,
fees, tricks and scams that you have to watch out for? Are you
up to the challenge of deciphering the ads and information on
long-distance carriers' Web sites and comparing their rates,
fees and special packages side by side? Don't worry, you don't
have to be -- SmartPrice.com
has already done that. They maintain an unbiased, current
database of information about nearly every long-distance
Their searchable database lets you enter some simple
information about your calling habits and, in return, get a
list of long-distance carriers that can offer you the best
deal based on that information. You can compare rates, see all
of the additional charges each carrier has, look at their
billing increments, see their quality ratings, and switch your
service on the spot when you choose to. These services
are totally free, and no personal information is necessary to
do the search.
Here is an example of how SmartPrice.com works.
What you'll get with the search may not be the lowest
per-minute rate, but rather the lowest overall monthly
bill. The database takes all of those variable fees and
charges into consideration. You can then look at each
carrier's plan to see which would work best for you.
Using a service like SmartPrice.com simply saves you the
time and frustration of trying to, first, find current
information about various long-distance carriers, and second,
set that information up so that you can compare each rate, fee
and other aspect side by side in order to make a good
decision. SmartPrice.com was started when one of the
co-founders had to do just that. He quickly found that it was
next to impossible to get the information he needed to make a
good comparison of long-distance carriers.
A Final Note About Your Phone Bill If you
have looked at your phone bill very carefully, you've probably
seen a lot of charges that you couldn't identify. Are these
charges that you have to pay, or can you somehow get
rid of them? Most of them are charges that the government
allows local phone companies to charge to recover some of the
costs of a local phone network. Let's take a look at what
should be there and what you should watch out for.
Here are some of the fees you'll probably see. Keep in mind
that some of these have nothing to do with your long-distance
Municipal Charge This is charged to pay for
local community services such as 911
and other emergency services.
Number Portability Service Charge This is an
FCC-approved charge that your phone company puts on your
bill when you switch long-distance carriers. It pays for the
administrative costs of switching from one long-distance
carrier to another.
Universal Service Charge This is a fee that
goes into a Universal Service Fund that was created
to help make phone service available to low-income
customers, customers who are in rural areas with higher
costs, and customers with disabilities. It is helps pay for
Internet access for schools and libraries, and it also helps
pay for links for rural health care providers to urban
medical centers for advanced diagnostic and other medical
services that are available. All telecommunications
companies that provide services between states have to
contribute to the fund. The fee they pay changes each
quarter based on the needs of the fund. They have the option
of charging their customers all or a percentage of this fee.
Most charge customers based on a percentage of the total
bill, a flat fee, or a percentage of just your out-of-state
Subscriber Line Charge This is a fee the
government allows your local phone company to charge you in
order to pay for the telephone
lines connected to your home. It isn't a tax that goes
to the government, but rather a fee the phone company gets
for putting in and maintaining those lines. The government
does put a limit on the charge so that phone service stays
at an affordable rate for everyone. The charge can be as
high as $5.00 for your primary phone line and $7.00 for
additional phone lines into your home.
Presubscribed Interexchange Carrier
Charge This is the fee the local phone company
charges long-distance carriers for accessing what is called
the "local loop." The local loop is all of the outside
wiring, underground conduits, telephone poles and other
facilities that are necessary to get phone service into your
home and connect you to the network. This charge picks up
where the Federal Subscriber Line Charge left off in helping
local phone companies pay for the lines, equipment, and
telephone service industry was deregulated in 1984,
AT&T, who had a monopoly on U.S. telephone service,
was broken up into many regional services, known as the
"Baby Bells." This all began as a result of MCI (at the
time, only a small carrier) suing AT&T over the
right to access local telephone exchanges. In 1996, the
Telecommunications Act opened up the market for local
and long-distance service to even more carriers.
Deregulation has improved the long-distance
services you have access to tremendously by creating
competition, which leads to better deals. You now not
only have more choices, but the choices come with better
deals like lower rates, more calling plans and smaller
Now, there are over 1,200 long-distance phone
services, but you've probably only heard of a handful of
them. The largest and most well-known are AT&T,
Sprint, MCI WorldCom, and recently Verizon. And there's
virtually no difference in the quality of the call,
because they all use the same fiber-optic
networks. The differences you'll see will be in the
of the companies, such as the billing practices, the
calling packages they offer, their rates and their
Services are also offered through Long Distance
Resellers. These are companies that have no
facilities for phone service themselves, but purchase
blocks of time from large long-distance carriers who do.
They buy large blocks of time at a big discount, which
allows them to then resell it at a lower price and at
the same time make a small profit. Their strategy is to
make money through the volume of time they purchase.
This can be a great deal for the consumer because
they get the same quality at a lower price.