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Half of all international calls in Australia are made using a Phone Card

A phone card is a small card, usually resembling a credit card, used to pay for telephone services. The exact system for payment, and the way in which the card is used to place a phone call, depend on the overall telecommunication system. But in general a phone card is purchased with a specific balance, from which the cost of calls made is deducted. Most phone cards are disposable; when the balance is exhausted, you buy a new card, rather than having the old one re-filled.

The original phone cards were optical devices, pioneered companies such as Landis & Gyr. Other early cards were magnetic ones, made by Plessy GTC and Autelca. New technology led to the "smart card" or "chip card".

The French payphones were the first large size deployment of smart cards in 1986: instead of change, users would insert a simple pre-paid smart card from which units would be deducted during the connection.

Many other countries followed suit, including Ireland in 1990 and the UK circa 1994-5, which phased out the old green Landis & Gyr cards in favour of more colourful smart cards. Some Landis & Gyr did have pictures on the lower part of the front of the card, and had a shiny black reverse.

In many areas, most public payphones are card-operated, with the card inserted into a slot to be read like a debit card, and the charges are deducted from an existing balance. Other phone cards come with a code printed on the card, which the user enters in order to place a call when payment is required. This may be done either from a public telephone, or on a personal phone to access long-distance and other services.

Telecom companies have also taken advantage of phone cards to place advertising on the card, or to feature celebrity portraits, artwork, or attractive photography to increase the appeal of the cards to consumers. This practice, combined with the disposability of the cards (encouraging individuals to purchase multiple cards), has led some people to start collecting phone cards as a hobby. This is known occasionally as “telegery” or “fusilately”.

Costs of prepaid telephone cards vary based on whether or not a connection fee is assessed. Some rates are as low a 1 cent per minute, but there is often a 69 cent connection fee and 3-minute billing. Wal-Mart sells calling cards reloadable in as little as 50 cent, 10 minute levels (5 cents a minute). Target varies in price, ranging from 4.95 to 7 cents depending on the size of the card; during certain specials rates fall to as little as 3 cents a minute.

In many countries in the world, prepaid international telephone cards have driven down the cost of international calls. For example, in Australia, the major telephone companies Telstra and Optus have been forced to drop their prices as customers moved from traditional phone companies to prepaid telephone cards, as now over 50% of all international call traffic originating in Australia is now via prepaid telephone cards, which are offering prices as low as 1 cent per minute for calls to major countries.

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