Credit cards get ready for a makeover with lights and buttons!

The simple credit card is about to get a makeover. New York Times reports that next month, Citibank will begin testing a card that has two buttons and tiny lights that allow users to choose at the register whether they want to pay with rewards points or credit, at almost any merchant they please.

Other card issuers are testing more newfangled cards, including some that can double as credit and debit cards and cards with fraud protections baked right into the plastic. One, for instance, shows a portion of the account number only after the cardholder enters a PIN.

The microscopic engine powering the plastic will help breathe new life into a 1950s-era technology, the black magnetic stripe found on the back of the 1.8 billion credit and debit cards circulating in the United States. Much of the world has already moved to using more advanced cards, like the ones in Europe that require a PIN and use a chip instead of a magnetic strip.

Even with the innovations, no one knows how long plastic cards will last. They may eventually be rendered obsolete by technologies that will transform consumers’ cell phones into virtual wallets, and a large number of companies, including Visa Inc, MasterCard Inc and Apple Inc, are developing these. But several card analysts say it will probably take a while before any one technology standard becomes available across all phones and merchants.

In the meantime, banks are hedging their bets. Citi’s cards, known as 2G, for second generation, are no thicker and just as flexible as conventional plastic, but they contain a battery with a four-year life, an embedded chip and, of course, the buttons, which took nearly a year and hundreds of thousands of dollars to develop.

“It’s a big deal,” said Megan Bramlette, Director of Research for the Auriemma Consulting Group, a payments industry consultant in New York. “If once a month a consumer can fill up their gas tank for free and they don’t have to do anything except push a button before they swipe their card, that’s cool. And that is something that I think will resonate with consumers.”

Dynamics Inc, the company that developed the minicomputers-in-a-card, said that it had more cards in the works and that its bank partners would introduce its electronic cards on their own schedules.

Citi’s cards will be tested by a select group of cardholders beginning in November, though some Citi employees have been testing the cards since May. The pilot programme will expand as Citi incorporates user feedback. The bank plans to make the cards available on a broader scale in mid to late 2011.

The 2G card will be offered on two of Citi’s existing rewards cards, including the Citi Dividend Platinum Select MasterCard, whose holders earn one per cent cash back on all purchases and two per cent on categories that change seasonally, as well as the Citi PremierPass Elite, whose holders generally earn one point for every dollar spent and mile flown.