The smart card achieves this because the card has a small yet powerful computer built into it. This computer allows the card to interact with the card reader, not just pass information to it. Just as their are many different uses for a smart card there are many different flavors of smart cards not to be confused with optical memory cards. Historically smart cards have been used as 'purse cards' or stored value cards. These cards have little functionality and perform very small tasks such as increasing or decreasing the purse on the card. Some cards such as the Schlumberger Cryptoflex perform cryptographic functions such as key and certificate verification, encryption, random number generation, etc. Others such as the Schlumberger Multiflex cards perform more general functionality. One of the Multiflex cards, the Cyberflex runs Java binaries on the card making it easier to write high-level programs for the smart card. Most smart cards have little program storage on the card, roughly 3 - 8K. The 100 mm. CPU containe d on a smart card has roughly the same capability as the 1970's Radio Shack TRS-80 Model 1 Personal Computer. Although the TRS-80 did not run Java binaries or have built in cryptographic functionality, it did operate at roughly the same speed as many mo dern smart cards.

The smart card is currently used mostly in Europe where it is used as a pay phone calling card or for vending machines, even ATM's. The United States is beginning to see smart cards in use for GSM phones, laundry, and vending applications. Although the uses for smart cards are numerous, there is still the cost issue. Magnetic stripe cards cost as little as 6 - 8 cents to make whereas a smart card can cost up to 10 to 15 times that cost. This makes it hard for companies like credit card companies to send you one of those "pre-approved credit cards" so you can just throw it away. The uses are seeming to outweigh this factor though and smart cards will quickly appear into our every day lives in the next few years.