Newspaper article St Louis Post-Dispatch (MO)

Prepaid Cards Catching on in America

Newspaper article St Louis Post-Dispatch (MO)

Prepaid Cards Catching on in America

Article excerpt

Prepaid phone cards come in boxes of cereal, with come-ons from book clubs - even in packs of the sports cards they resemble.

Chances are good that if you got a free prepaid card in the mail or a cereal box, you tossed it in the garbage or put it in a kitchen drawer along with the spare paper clips, stamps and rubber bands.

Too bad. Some cards given away as premiums are worth hundreds, even thousands of dollars to collectors. Most are worth a few minutes of long-distance calling, unless they've expired.

Prepaid cards are starting to catch on, whether as a substitute for coins or credit cards, as promotional giveaways or as collectibles. Sales last year climbed into the hundreds of millions of dollars by some estimates.

But few Americans understand prepaid phone cards. Even the most zealous of phone card promoters estimate that fewer than 5 percent of Americans know how to use them.

"It's kind of a new concept for Americans," said Rob Slemmons of Sprint Corp. Prepaid cards first made their appearance about 20 years ago in Europe and Asia. In France, post offices sell phone cards, which are the only form of payment France Telecom's pay phones accept.

The first U.S. cards came out in 1987, but few were available until late 1993.

Once you're aware of the cards, they seem to be everywhere. They're being sold over the phone, over the Internet, in vending machines and over the counter. 7-Eleven is the nation's biggest retailer of prepaid cards, with 3 million sold last year.

As many as 500 companies issue the cards, said Howard Segermark, executive director of the USTelecard Association, a trade group. Segermark says he expects cards with a face value of $1.1 billion to be issued this year.

Telephone companies say the cards can help them penetrate markets that otherwise might remain closed to them - people without phones or long-distance service, students, soldiers and business travelers. The cards also can be used as gifts - or as a way to avoid credit card fraud.

Most long-distance companies put out phone cards or issue them for customers. AT&T Corp., MCI Communications Corp., Sprint and LDDS WorldCom are promoting them as a convenient alternative to coins or credit cards for long-distance calls.

"Convenience is one of the biggest things that people are looking for," said MCI's Paul Adams. "People on the road don't have to fiddle with credit cards or worry about the bill they'll get six weeks later."

John Guillaume, PhonePass marketing director for LDDS WorldCom, said the company expects cards to take off now that nationwide retailers like Target, Sears and 7-Eleven are selling them. "I think there's going to be exponential growth over the next few years."

Local phone companies are getting into the act, too, along with long-distance resellers and companies that produce cards intended as collectibles. …

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