Europe has ATM machines all over the place. Instead of using travelers cheques, use an ATM debit card. We made sure that our bank will not charge a fee for converting currency from Euros to Dollars (the current exchange rate is bad enough). We'll use this to get cash for small items like gelato and calzone.
For larger purchases (air tickets, hotels, clothing, gifts, etc.) we are using a brand new CapitalOne Visa card. The biggest reason for this is that Visa charges a percentage to convert currency (even when you buy using dollars from a foreign country). Your bank may charge an additional 1-4% on top of that. Disgusting. CapitalOne not only doesn't charge the 1-4%, but they also immediately refund the Visa charge. Top that off with a several month 0% interest rate and generous cash back points and you'll agree that this is the only real way to go.
