This is a common problem for functional components that use the useState hook. The same concerns are applicable to any callback functions where useState state is used, e.g. setTimeout or setInterval timer functions.

Event handlers are treated differently in CardsProvider and Card components.

handleCardClick and handleButtonClick used in the CardsProvider functional component are defined in its scope. There are new functions each time it runs, they refer to cards state that was obtained at the moment when they were defined. Event handlers are re-registered each time the CardsProvider component is rendered.

handleCardClick used in the Card functional component is received as a prop and registered once on component mount with useEffect. It's the same function during the entire component lifespan and refers to stale state that was fresh at the time when the handleCardClick function was defined the first time. handleButtonClick is received as a prop and re-registered on each Card render, it's a new function each time and refers to fresh state.

Mutable state

A common approach that addresses this problem is to use useRef instead of useState. A ref is basically a recipe that provides a mutable object that can be passed by reference:

const ref = useRef(0);

function eventListener() {
  ref.current++;
}

In this case a component should be re-rendered on a state update like it's expected from useState, refs aren't applicable.

It's possible to keep state updates and mutable state separately but forceUpdate is considered an anti-pattern in both class and function components (listed for reference only):

const useForceUpdate = () => {
  const [, setState] = useState();
  return () => setState({});
}

const ref = useRef(0);
const forceUpdate = useForceUpdate();

function eventListener() {
  ref.current++;
  forceUpdate();
}

State updater function

One solution is to use a state updater function that receives fresh state instead of stale state from the enclosing scope:

function eventListener() {
  // doesn't matter how often the listener is registered
  setState(freshState => freshState + 1);
}

In this case a state is needed for synchronous side effects like console.log, a workaround is to return the same state to prevent an update.

function eventListener() {
  setState(freshState => {
    console.log(freshState);
    return freshState;
  });
}

useEffect(() => {
  // register eventListener once

  return () => {
    // unregister eventListener once
  };
}, []);

This doesn't work well with asynchronous side effects, notably async functions.

Manual event listener re-registration

Another solution is to re-register the event listener every time, so a callback always gets fresh state from the enclosing scope:

function eventListener() {
  console.log(state);
}

useEffect(() => {
  // register eventListener on each state update

  return () => {
    // unregister eventListener
  };
}, [state]);

Built-in event handling

Unless the event listener is registered on document, window or other event targets that are outside of the scope of the current component, React's own DOM event handling has to be used where possible, this eliminates the need for useEffect:

<button onClick={eventListener} />

In the last case the event listener can be additionally memoized with useMemo or useCallback to prevent unnecessary re-renders when it's passed as a prop:

const eventListener = useCallback(() => {
  console.log(state);
}, [state]);

• Previous edition of this answer suggested to use mutable state that was applicable to initial useState hook implementation in React 16.7.0-alpha version but isn't workable in final React 16.8 implementation. useState currently supports only immutable state.*