His view is that the chip verifies that the card is not counterfeit, and the PIN proves that you are the authorized user.
Others suggest that PIN authorization is not needed because of the difficulty in counterfeiting smart cards.
"Merchants see the PIN as a more secure option, but it doesn't make a lot of sense to the banks because it really doesn't do anything," said Alphonse Pascual, a senior analyst for security, risk and fraud at Javelin Strategy & Research. "It would be like putting a new deadbolt on your front door and then putting gum in the lock. It's the lock that's protecting you, not the gum."
There's also the concern that Americans, who tend to have a variety of credit cards, would have a tough time managing multiple PINS.
"If the consumer doesn't want to memorize all those numbers, they might choose the same PIN for each card," said Randy Vanderhoof, executive director of the nonprofit Smart Card Alliance. "Using one PIN to protect 10 different cards in your wallet now exposes you to the potential for increased fraud."
PIN technology could pose a challenge to credit card issuers, which must deal with users who can't remember their PIN or need to change it. That was a problem when Canada switched to chip-and-PIN credit cards, but people eventually got accustomed to it.
How long will it take to make the switch?
There's no government mandate or fixed time line. Visa, MasterCard, American Express and Discover want the country converted to smart cards by October 2015. And they're using the threat of lost profits to move things along.
(Read more: Hotels data breach ire could lead to tipping point)
After that date, fraud losses would shift to retailers if their point-of-sale payment terminal can't process smart cards and the transaction turns out to be fraudulent. (Smart-card readers will be able to accept both magnetic stripe and chip-enabled credit cards during the transition).
Target CFO John Mulligan told a congressional committee last week that his company hopes to have smart-card readers in stores by year-end. Target also plans to issue a chip-and-PIN version of its RED cards early next year.
Smart cards won't stop all credit card fraud, of course. A stolen account number can still be used to make online or telephone purchases, when the card doesn't need to be presented. Retailers and bankers know that, and they're already exploring solutions.
"But for now," Vanderhoof said, "deploying these chip cards is the most important step in the process."
—By CNBC contributor Herb Weisbaum. Follow him on Facebook and Twitter @TheConsumerman or visit The ConsumerMan website.