A chip made of silicon is embedded in a credit card sized plastic card. The chip may or may not be visible on the card surface. The chip makes the card intelligent and may have storage capacity only, or computational capabilities also. Encryption technology secures the card against fraudulent use. These cards are also commonly called Smart Cards.

The type and size of the chip determines the perfomance of the card. The choice will depend upon the requirements of the task you want the chip to accomplish. There are two main types of chips:

• Memory Chip — a memory chip represents a simple storage device. It has similar functionality to magnetic stripe cards but a much greater memory capacity and higher security. Information can be stored in the card's memory and the card can perform several different functions. A typical memory chip use is pre-paid telephone cards.
• Microprocessor Chip — a micro-controller chip with an operating system. It can read & write data with high security, house several programs and execute multiple applications such as e-purse and loyalty functions.

There are three types of technology to access data from the card:

• Contact — the contact interface requires the card to be inserted into a card reader to establish a direct electronic contact with the chip. This design is generally used for applications requiring higher levels of security, such as financial transactions.
• Contactless — cards containing a chip and an antenna sandwiched between two layers of plastic. Communications are facilitated using radio frequency technology, when the card is placed within approximately 10 cm (four inches) of the smart card reader. Contactless cards are used for operations that require greater speed or ease of throughput, such as high volume transit fare collection systems or building access.
• Hybrid or Combi — contact and contactless functionality incorporated into a single card design. The card contains either 2 chips with separate interfaces or a single processor supporting multiple interfaces. Although more flexible, these cards are also much more expensive.