There are cards that come with or without chips. But which one is smarter? Smart cards are the ones with chips. One would think that the smart cards are far superior to the age old 70's card which had the magnetic stripes. In reality, the information that is required, in case of the old card, is supplied by the network and it does not have to rely on the microchip.

In the U.S. alone around 13 million of these magnetic stripe readers are in existence. They no longer require a counter to rest on. Instead a tiny gadget doubles up as a magnetic stripe reader when it is attached to the iPod, iPhone, iPad, or Android phone.

The smart card is also similar in having the magnetic stripe and the information provided is the same as that of a conventional card, however it uses the smart reader. In the U.S. about 600,000 smart readers are installed in the terminals at the point of sale.

Europe has been using the smartcards for quite a while now. Target had offered millions of smart cards and equipped cash registers with smart card readers. Customers would download coupons onto the card from the Target website. Target wanted to keep the brand innovative and hip in comparison with the others.

AmEx had the chip installed in its Blue card in the year 1999. The ExpressPay was added on in the year 2005. The chips were embedded in the card or in the keychain and required just a wave not the regular swipe, in case of ExpressPay readers.

Magnetic stripe cards became a lot easier to use after the ExpressPay made its way. Signatures were no longer required on small transactions as card companies had done away with that. Retailers also let consumers swipe the magnetic card themselves and thus saving time. So it did not matter anymore whether the card was swiped or waved as both were advantageous.

Magnetic stripe cards are connected to mainframes in the U.S. Fraud analysis is conducted in real time by this machinery. All that the company has to do is upgrade its centralized security system for changes to occur instantaneously. Hence it does not matter if the card is smart or dumb as long as up gradations are centralized.

However, Smart Card Alliance, Executive Director, Randy Vanderhoof states that mag-cards can be easily copied by fraudsters and smart cards could contain such fraudulent practices.

Europe has adopted the chip-and PIN system, which is a two-way authentication process, wherein customers use something they have as well as something they know. This might soon spread to the U.S.