The 1.8 billion credit and debit cards sitting in American wallets and purses are about to take a leap into the digital age, according to a report in the New York Times.
U.S. credit cards have relied on magnetic-stripe technology to store information since the 1970s, but soon these small, thin slabs of plastic will be engineered with batteries, embedded chips and buttons, the report said.
Citibank, for example, will next month begin testing a card that allow users to decide at a register whether they want to pay with rewards points or credit by pressing buttons that change the data imprinted on the card's magnetic stripe. Other issuers are testing cards that can double as credit and debit cards, cards with fraud protections baked right into the plastic that reduce the fraud associated with "skimming" (when thieves steal your account details using a small scanner), and cards that allow consumers to hold multiple accounts (corporate and personal, for example) on a single credit card.
These new technologies took nearly a year and hundreds of thousands of dollars to develop and could be widely used by mid to late 2011, the paper said. Much of the world has already moved to using more advanced credit cards. In Europe, for example, consumers use cards that use a chip and PIN instead of a magnetic stripe. The United States appears unwilling to move away from magnetic stripes, the report notes, and so card companies are extending its life by adding new features that work with it.
But even with these new technologies, the plastic credit card's days could be numbered. It may eventually be rendered obsolete by technologies that turn cellphones into virtual wallets, the report says, noting that Visa, MasterCard and Apple are developing this technology, although it will probably take a while before any one technology becomes standard across all phones and merchants.
Here's more on the credit card changes from CNBC: