Smart cards contain a microprocessor to manipulate data which is stored in memory. They are read/write capable and extremely secure. Smart cards are available for either or both contact or proximity (non-contact) reading. A number of credit card issuers are running pilot projects with smart cards.

One of the more significant advantages of smart cards is their large memory capacity. This would allow each card to be "personalized" for a user by including biometric information such as a fingerprint. Another significant advantage is that multiple applications can be housed on the same device. In Europe, several transit authorities are issuing smart cards that are not only transit passes but can also be used to purchase goods from participating retailers.

It should be noted that memory-only cards that have no microprocessor in them are sometimes also called "smart cards" although "memory card" is probably a better term. (Note: the technical jargon subcommittee of the obfuscation task force is behind on straightening this out...you may notice a lot of this kind of thing.)

Smart Card Advantages:

• Large data capacity,
  
• Secure data storage,
  
• On-board intelligence,
  
• Multi-application capabilities, and
  
• Read/write capabilities

Smart Card Limitations:

• Cost of cards,
  
• Potential for physical damage to cards (flex),
• Security ("skimming") concerns.