This document discusses smart cards, which are credit card-sized cards with embedded integrated circuits that can store and process data. There are two main types: contact smart cards that connect to readers via contact points, and contactless cards that communicate via radio frequency. Smart cards have advantages over magnetic stripe cards by providing secure storage, processing capabilities, and supporting multiple applications like banking, ID, and transit payment. Some challenges are the risk of physical damage, loss, and potential security issues from malware, but overall smart cards improve transaction security and convenience.