How do Payments work in Iceland?

A frequent question by would-be visitors is what currency to use in Iceland, whether to bring cash, and then how much. Allow me to explain.
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[@S-series1977]

WOW SUPER NICE 🎉🎉🎉😢🎉🎉🎉, SUBSCRIBED

[@JustinMcCarthy-cy1mv]

I never even saw any cash in Iceland. I just paid for everything by card… or I could have used my phone.

[@ivargu]

That is indeed the way to go here

[@davidhjortnaes2000]

Do you ever pay for anything with a handful of coffee beans?

[@ivargu]

Hehe... not yet 😉

[@Urspo]

I say þetta reddast

[@ivargu]

Nákvæmlega!