A smart card also known as the chip card, or integrated circuit(s) card (ICC), is a pocket-sized card which has embedded integrated circuits. The two broad categories of ICCs are:

• Memory cards: Contain only non-volatile memory storage components and perhaps some specific Security logic.
• Microprocessor cards: Contain memory and microprocessor components

While a contact based smart card generally looks like a credit card and made of plastic, Contactless Smart cards are now available in various shapes and sizes. What makes a smart card ‘smart’ is the microchip. The microchip, which replaced the previously used magnetic stripe, allows for the storage and management of large amount of information. It also allows the performance of computing tasks through a microprocessor included in the chip. Thus the ICCs memory and processing power accommodates multiple application enabling flexibility and ease for the customer.

However please note that all chip cards do not contain a microprocessor. The credit card dimension card or smaller, e.g. the GSM SIM card, have tamper-resistant properties like secure crypto-processor, secure file system, human-readable features and is capable of providing security services e.g. confidentiality of information in the memory is not always true. Therefore not all chipcard are necessarily also smart cards.

These smart cards become active when they are inserted into a card-accepting device (CAD) like an smart card reader equipped teller machine. The CAD powers and connects the microprocessor to the computer system. For the ‘contact less’ cards you need to only sweep it close to the sensor reader that interacts with the microchip's magnetic field. These are mainly used in security and transport applications.