During our last trip to Europe (France,England) in 2003 we encountered a problem one time with our US credit card. Many cards in Europe have a "chip" and thus more modern than our US credit cards. We were unable to use the card at that establishment because they could not process it. Has anyone encountered this? We will be travelling to Italy this summer and just want to be prepared.

It does happen occasionally. Just make sure that you have the cash to cover the cost of your meal or hotel room. Given the recent discussion aqbout increased fees, you might want to to with cash withdrawals from your ATM as long as your bank does not charge outrageous fees like BofA ($5 per transaction except with member banks). I have just set up a (travel) account with my local credit union to bypass all these extra fees and have decided to shred the MBNA card I used last year.

You don't specify where you are going in Europe, but in some places the customer swipes the card an enters a PIN on a keypad instead of signing a credit slip. To be safe, get PINs if you don't already have them for the credit cards.

Sorry I hit send before I spotted the word "Italy" in the OP's message -- I haven't seen the swiping and PIN practice there, but in the Netherlands and Demark. But having a PIN for the credit card allows you to use it an ATM for a cash advance in an emergency (interest starts running right away so this isn't advisable except as a back-up).

Yes, I encountered it in France last fall, and Germany a year ago, at certain pay-at-the-pump gas stations. I had to use real money!

you might also want to contact your credit card firm and tell them that you will be in italy and that charges from there will be appearing. Ours routinely scans and will put a hold on the card when they see charges from overseas. Can be a real pain since DH is over there in various countries a lot! however, just knowing that they are on the ball is also a good feeling I guess.

Spent three weeks in Central Europe( Czech Republic, Poland, Hungary, Austria) last month. Used my Visa card whenever I could and NEVER had a problem.
Have a great trip.

I've only had the problem in some machines -- the train ticket machines in Amsterdam were a main problem, and finally a local who saw me having trouble said, "if you're from the US your card probably doesn't have a chip and won't work in these machines". He was obviously right. Also had the problem with a couple of the petrol self-service machines.