By Rick Steves
In Europe, day-to-day spending is largely cash-based. So when I'm there I rely mostly on cash, though I appreciate the convenience that credit cards offer. For me, it all comes down to maximizing ease and minimizing fees. I pay for as much as possible with cash, using a bank that charges low rates for international ATM transactions and withdrawing large amounts at each transaction.
I never exchange dollars for foreign cash at a currency exchange booth, and I don't bother getting euros, pounds, or whatever prior to my trip. When I arrive in Europe, I head for an ATM at the airport, load up on cash, and keep it safe in my money belt.
American credit cards work throughout Europe (at hotels, larger shops and restaurants, travel agencies, car-rental agencies, and so on); Visa and MasterCard are the most widely accepted. American Express is less common (because it costs merchants more) but is popular with some travelers for its extra services. The Discover card is unknown in Europe. It's a good idea to bring an extra card as a backup (especially if you're renting a car and using your card to cover CDW insurance).
I use my credit card to book reservations by phone (for hotel rooms and a rental car), to cover major expenses (such as plane tickets and long hotel stays), and to pay for things near the end of my trip (to avoid another visit to the ATM). If you'll be shopping a lot or settling bills at pricey business-class hotels, you might use your credit card more than I do — but you'll still be better off using cash for smaller purchases.
Because merchants pay sky-high commissions to credit-card companies, small European businesses (hotels, restaurants, gift shops, and more) often prefer that you pay in cash. Vendors might offer you a discount for paying with cash, or they might not accept credit cards at all. And having enough cash on hand can help you avoid a stressful predicament, especially in countries where chip-and-PIN cards are common, as you may find yourself in a place that won't accept your credit card.
A dependence on plastic reshapes the Europe you experience. Pedro's Pension, the friendly guide at the cathedral, and most merchants in the market don't take credit cards. Going through the Back Door requires hard local cash. Minimizing debit- and credit-card use also guards against card fraud or theft: The less you use your cards, the less likely your information will be stolen.
Remember, you're on vacation. Don't get stressed about money in Europe; just spend it wisely.