How do calling card companies get such low rates and still make money?

How do calling card companies get such low rates and still make money?

We have taken over 10 different calling card company cards and tested to see if they really have the rates they say they do. The fact is, they have the rates they say they do, but after all of the fees, the price is often 60% more per phone call than advertised.

For example, there was one card in particular that was a $5 card that we purchased to test. The advertised rates where 4.5 cents to the Dominican Republic. This seemed very good, as more providers’ costs are 4.5 cents to the Dominican, it appeared to be at cost. There was a weekly fee of $0.69, a hang-up fee of $0.15, a general fee on each call of 35%, and rounding was to every 3 minutes. We did the following test:

Dominican Republic	Advertised Rate of 4.5 cents	Actual Cost after fees	Actual Cost Per Minute
Test 1	$5.00
Call 1- 9 minute	$0.41	$1.81	$0.20
Call 2- Hang-up	$0.14	$0.39	$0.39
Call 3- 20 minute	$0.90	$1.54	$0.08
Call 4- 17 minute	$0.77	$1.30	$0.08
46 minute total		$5.04	$0.11
Test 2 (Best Case Scenario)	$5.00
Call 1- 51 minute	$2.30	1.75	$0.10

Based on these variables it became very apparent that the advertised rate of 4.5 cents was actually between 10 and 11 cents. Some other cards advertising the same rate of 4.5 cents had best case scenarios of 7.2 cents.

Basically, the cost of minutes may or may not be 4.5 cents when they buy them. The fact that a consumer agrees with the terms of the calling card when they purchase a card sets the precedence for the rate. We recently did this test to do the following:

1. Show that Calling Card Profits are 60% and up, and on average make a profit of 40% after distributor commitments and printing.
2. To show that at cost rates of 4.5 cents are not at cost, they are making profits on the fees.

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Go to: http://www.vocalscape.com/callingcard.htm