Credit Cards With Chips Have Little Use in U.S.
By SAUL HANSELL from the New York Times

Suddenly, smart cards — credit cards embedded with tiny computer chips — are everywhere. American Express (news/quote) put a chip on its sparkly new Blue card, and issued 2.2 million of them in just 14 months. Rushing to mimic Blue's success, Visa says at least four of its banks will issue seven million credit cards with chips on them this year. And MasterCard says it is getting into the smart card business, too.

The cards may be smart, but so far they haven't showed it. In contrast to Europe, where smart cards have been used for a decade to fight fraud and reduce telecommunications costs, there is hardly anything that can be done with one in the United States.

In other parts of the world, companies are experimenting with using smart cards for electronic cash, but that idea has flopped in the United States. As a result, few stores have smart card readers that can connect with the new, chip-equipped credit cards. Nor do most wireless phones here take chip cards, as they do in Europe and much of Asia. The card companies say the chip cards add security for shopping on the Internet, but a survey showed that only 6 of every 1,000 Blue card holders have actually used the chip on the Web.

So far, smart cards in the United States are little more than a silicon and plastic fashion statement. Credit cards have long been marketed with insubstantial distinctions, like the rise a few years ago in "platinum" cards that differed from gold cards in little more than color. Now some bankers see smart cards as this year's platinum fad, said Michael Auriemma, president of Auriemma Consulting in Westbury, N.Y., only more expensive for the issuers.

"One of my clients said, at least half seriously, that he wanted to put a picture of a chip on the card," Mr. Auriemma said. "It has the same functionality and it costs $3 less."

The credit card companies do worry that customers will eventually notice that the future they have been promising has never arrived. And so they are now scrambling to find useful things to do with the chips that are already in millions of wallets.

"Right now, there isn't a lot of utility associated with the cards," said Carl F. Pascarella, president of Visa U.S.A. "We have to look for ways to justify the chip and create a consumer-value proposition in the marketplace."

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