There was an article awhile back on FlyerTalk.com regarding a poll taken of frequent international travellers.
Most respondents said they used credit cards almost exclusively and carried little, if any, cash. Reasons cited were convenience of use, favorable exchange rates and fraud protection limiting losses in event of theft.
Are we really entering the age of cashless travel?
I don't think we're there yet, but certainly in Europe, I've noticed much more acceptance of credit cards even by the smallest restaurants and hotels.

Why wouldn't anybody want to use credit cards to the extent they are accepted in Europe? After all when a merchant accepts a credit card, part of the deal is the amount the merchant pays to the cc issuer is absorbed into all the prices so you're paying for the credit card acceptance whether you use it or not.

Some of this attitude, especially in France, was born of the strike by drivers providing bank notes to banks (nut just the ATM's BTW) several years ago. Many merchants dropped the imbecilic rule on mimimum usage' for example the Metro began taking CC's for fares as low as €1 (which was about 7 FF at the time)...they found nobody was inconvenienced.

So the proper way to travel in this day and age is:

1. You use your credit cards (hopefully being smart enough to stay away from the credit cards that add the additional 2% fee to currency exchange) whenever they are accepted for amounts no matter how sma..

2. You use ATM's for small amounts of local currency needed for those few merchants who have not entered the 21xst century yet and take credit cards.

Keeps costs down as low as possible and the only way to travel.

With credit card companies tacking on 3% to all currency exchange transactions, sometimes it just pays to use cash. I called our credit card companies (4 of them) before we left the states for Europe in July to inquire about charges. Each added 3% to every transaction. I used ATM cash as much as possible and credit cards mostly for merchandise purchases or at night at restaurants if I ran out of cash. You still need cash anyway for taxis, tips, small shops that don't take plastic, etc. I never exchanged cash for cash as ATM's are all over and easy to use. Do you have to take cash with you going to Europe? No. But you do need it when you're there and it's less expensive than using credit cards.

Even with the 3% it is cheaper to use cc's than cash although admitedly ATM's provide good value.

Of course, when you use cash for purchases, you have no leverage. With cc's, you can generally right wrongs (defective goods etc.)

Finally, the 3% fee for cc's is hardly universal; you are simply calling the wrong banks. Try MBNA, Capital One or USAA for your credit card needs and you won't pay the extra 2%.

On my last trip, I didn't, but COULD have paid for all hotel rooms, meals, public transport, museum fees and souvenirs with credit cards. What else is left? Incidental expenses here and there (ie cup of coffee, ice cream, Tic Tacs).