How do hotel cancellation, prepayment and currency changes combine?

Question

I was looking on booking.com to book some hotels for our trip next year. Quite a few deals have free cancellation until 1 day before arrival, which is always useful. However most of them also have a prepayment of 100% of the first night or even the complete booking "on the day of booking". So if I book now, the price for a full night will be charged on my credit card today (or at least this week)?

Cancellation: If cancelled or modified up to 1 day before the date of arrival, no fee will be charged. If cancelled or modified later or in case of no-show, 100 percent of the first night will be charged.

Prepayment: 100 percent of the first night will be charged on the day of booking.

If I cancel in time, how sure can I be that I get everything back? Next to that, I'm booking the rooms in USD, but my card and account are in EUR. My bank charges 1,5% fee to change between currencies. When I get my refund, this will be again charged a 1,5% fee? (Not taking into account that the exchange rate between 2 currencies also change over time).

Answer 1

You will get everything back if this is a trusted dealer and your cancellation gets through; booking.com is quite trusted! You also get protection through EU legislation if there is a problem with your provider and you paid with your credit or debit card.

If you are in the EU, from my experience, the transaction will be rolled back at the same USD amount (as you were charged in USD) and the bank's changing fee for the payment will be lost but you will NOT lose/win depending on the rate change (it will keep the same one). You won't pay a changing fee for the refund, as you get credited – changing fees only apply to debits.

It seems that it is because they are rolling back the original transaction you made instead of refunding through a new transaction: this is why you don't need to enter your card information again for a refund in this case.

For comparison, if you do the same process e.g. for airline tickets you bought in the "physical" world and they can't figure or use the transaction number you had, you will have to enter your card and type your PIN again, and you will face the rate changes. That's why you may cancel an airline ticket anywhere in the world, but the refund you may be entitled to should be done if possible in your home country / currency, even if the ticket was bought outside of your country, for you to avoid losing a few percent of the amount (quite big sums already on long flights), even after return if your fare allows (you mostly have from a few months to a few years to do it at home after you cancelled).

Answer 2

Unfortunately, you can't. Your "100% refund" will almost certainly be a different amount than your original payment (in terms of your local currency).

I can't speak to the EU in specific, but unless there's some law that specifically requires card issuers to shield customers from exchange rate risk, you won't be protected again this. Exchange rates fluctuate constantly and the rate applied to one transaction will be different from the rate applied to another transaction depending on when it is processed by your financial institution.

The ability to transact at current exchange rates, instead of at a fixed rate (e.g., if you converted all your money at once at a currency exchange place at the start of your trip) is one of the advantages to using a credit card while travelling.

As far as the foreign transaction fee charged by your bank, I would guess you will be assessed the fee twice. This may depend on your bank, but they could easily argue that it makes sense to charge the fee twice -- they are receiving the refund in a foreign currency and need to convert it to your local currency before processing it on your behalf.

Answer 3

In truth, very few places (in the US, at least) will actually charge your card at time of booking. Many will say that they will, especially for non-refundable bookings, but in general your credit card will normally be charged :

• For "pre-paid" bookings - somewhere between a few days before your arrival date, and when you check-out.

• For non-prepaid bookings - at check-out (although a hold will be put on your card at check-in or maybe a day or so earlier)

Charging at time of booking, especially for refundable bookings, creates countless accounting issues for the hotel which is why they generally avoid it.

More and more hotels are using text stating that your card will be charged 'sometime between time of booking and the day before your stay commences' rather than claiming it will be charged at the time of booking.

If you want to find out when you're actually being charged, try making your booking using a card where the charge will not be approved (eg, a pre-paid card with insufficient funds available) and then see when they contact you regarding problems charging your card. You'll find that it's normally no more than a day before arrival. Note that this can backfire if the hotel cancels the booking due to not being able to charge you - especially if it's an international booking/phone number.

Note that these comments only apply when it is the hotel that it actually charging you, which is the case when you book either via the hotel themselves, or via a "travel agent". Most hotel websites, including bookings.com, are simply "travel agents". The exception is services like Priceline and Hotwire's opaque booking services (where you don't know the exact hotel before you book), and some group booking sites - in these cases you will be charged the moment you make your booking, however there's generally no refunds so it's not that relevant to the question.