pay in euros or dollars?

Euros. Always pay in the local currency. You never know what exchange rate the merchant will give you. Your bank's rate is almost always better.

It makes very little difference to you but it's best to pay in local.

What is going on here is a fight between the vendor and your credit card company for the commission rate. If you pay for it in EUR your credit card company gets to do the EUR-USD conversion and makes a fat profit on the conversion rate. If you say you want to pay in USD then the vendor does the conversion and gets the commission on the transaction.

Expect a lot more of this sort of thing. In five years time every foriegn credit card transaction in Europe is going to be preceded by that question.

PLUS ..... if your credit card is charging a currency conversion fee, they will charge the same fee even if it is listed as dollars. This system is called dynamic conversion. Avoid it at all cost. You have the right to request the charges listed in local currency.

If the vendor just goes ahead and rings your transaction in dollars without asking you first, do you have the right to demand he void it and re-ring it in euros (or pounds or whatever)? And if so, do you think it would create a lot more headaches in the long run?

The best way around this is to pay for everything except big items (hotel etc) with cash from tha ATM. That way there is only one conversion and it is done by the bank using official exchange rates.

I always hit the ATM at the airport and buy local currency and pay for most purchases with it. If I charge anything I insist on being charged in local currency.

Interesting. I've done a fair amount of pre-paying for as many things as I can (museum tickets, hostel reservations, etc.) before the dollar fell even more.
When I reserved - on Aer Lingus - my ticket for DUB-AMS, the website asked if I wanted to charge it in USD (at THEIR exchange rate) or in Euros (at the bank exchange rate). I opted for Euros saving $$ in the long run.

What about a combination of both? I'll have some carrying around money but will be using the bank visa card for the larger purchases - at larger places - not some of the teeny-tiny places.
Thanks in advance!

Euros - since you dont know what their rate will be!

[Editor: To end topic...Some overseas merchants are using payment-processing services that automatically convert U.S. travelers' purchases from the local currency to dollars. Many Americans are getting hit with two fees on their overseas purchases: one from the merchants and one from their card. Some issuers continue to charge a 2% to 4.5% fee on international charges, so cardholders could potentially pay an extra 5% to 10% once all the fees are factored in.

After swiping a credit or debit card, a merchant with a dynamic currency-conversion service will usually ask foreign buyers if they want their charge converted to their home currency immediately rather than wait until the credit-card bill arrives in the mail. Travelers can become disgruntled with the practice because their credit card continues to charge cross-border fees -- usually another 2% to 5% -- on top of the merchant's conversion fees. The providers of the technology merchants are supposed to give customers a choice. Ask us via [email protected]]

I just came back from Europe and this question was everywhere. Of course I said euros or pounds. As has been pointed out, this is just sleazy. There is no reason an informed consumer would elect dollars. I hate to be a jerk to store clerks when abroad, but I wonder if the only way to stop this is each time to earnestly ask the clerk "it depends. what is the exchange rate you are offering?" They would then have their time burned up with a silly question and their inability to answer will show how anti-consumer this practice is.

I always pay in cash (Euro) which I get from the ATM (at 0-1% discount). The only time I've ever paid with a card was from a ticket automat that did not take cash.