The "one or two fingers" rule is good, but doesn't work with all cats. Jamie wears a breakaway, reflecting collar, as does ZsaZsa, our "half cat", who goes outdoors. Miezi, our other "half cat" (both decided to live here, and were semi-successfully rehomed at our neighbor's, due to Jamie's antipathy toward other cats), doesn't wear one, because she usually manages to dispose of them within 2 or 3 days. Her record was 3 lost collars in a little over a week. All three are tattooed and microchipped (we have universal transponders here), but many shelters don't have scanners, and town/county road maintenance workers don't use scanners if they remove dead cats from roads. They will notify owners if the cat bears ID tags, but that's it.
I'm a bit skeptical about the breakaway collars, as for some reason I have trouble opening the plastic catches. I don't trust the ones with elastic bands at all, as the elastic stretches far too easily. Jamie has managed to get out of the house about 5 times in the past seven years (he opens doors), so I feel he needs the added protection of a collar with tags, and at this point he feels "naked" without a collar. I put a new one on him Friday, and he fussed the whole time while I removed his tags from the old one, and put them on the new one.
I have seen an alternative here - some people have their cats' ear pierced, and a little capsule earring has the owners' name, address, and phone number