Since the currency in the Cayman Islands is not the US dollar, is it best that we pay for everything using a credit card? I've never exchanged money before and I'm not quite sure what to do.

It's your choice, but it was made fairly easy when I was down there. Many places gave you the price amount in both currencies.

beth48: please post a trip report when you return. We are considering the Marriott GC for a trip next spring. Let me know what you think!Thanks.

If you use US$ you will get $.80 to the dollar. If you use a debit card and get cash from an ATM it will be closer to $.82 to the dollar. US cash is readily accepted all over the island, but you will usually get change back In CI$.

We used US currency for shopping, paying for tours, and eating. No problem with anyone taking it. We were given US currency back in change.

They'll accept either US Dollars or Cayman Dollars. However, if you pay cash with US Dollars, you'll find that you're paying more - they "round up" the exchange rate, so it's like paying a 5-15% premium on everything you buy. My recommendations are: 1) charge everything you can. You'll get a competitive exchange rate that way. 2) for pocket cash, just make an ATM withdrawal. You'll get Cayman Dollars, and once again the exchange rate from your bank will be more competitive.

Check your credit card documents closely - most do have a "foreign transaction fee" My MBNA VISA has just increased the fee to 3% of the charged amount. Now this is still a better deal than some of the other options, but you do need to be aware of it. I try to save the credit card for big dollar purchases and do smaller things in cash.

You might find this currency calculator for the Cayman Islands to be helpful:
http://coinmill.com/KYD_calculator.html