Some of the multifunctioning credit cards developed by Dynamics.

The simple credit card is about to get a makeover.

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 most 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.

Cards of the future

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 awhile 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 electronic cards on their own schedules.

Rewarding experience

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 program 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 1 percent cash back on all purchases and 2 percent 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.

To pay with points, users press the request-rewards button before swiping the card; the button marked regular credit allows a straight credit transaction.

Pressing the buttons changes the data imprinted on the magnetic stripe, so it still works like conventional plastic and can be swiped through existing card terminals nationwide. At least for now, cardholders need to know how many points they have, and if they don’t have enough, the transaction will be processed using credit.

“We’ve developed a proprietary technology that will allow Citi to do the conversion when the transaction comes through,” said Terry O’Neil, executive vice president of Citi Cards. “All they need to do is push that request-rewards button, and we take care of everything else for them. They leave the store with the merchandise they selected.”

The cards are going to be most valuable to bigger spenders. The average cardholder spends about $6,300 a year, according to The Nilson Report, an industry report, and, on a typical rewards card, users may earn one point for each dollar spent. At one penny a point, that translates into about $63 in annual rewards.

Still, that’s enough for a free cup or two of coffee each month.