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I'm planning for a trip from the US to Iceland and I've noticed some hotels give the option to pay now or later. I'm specifically talking about Expedia but they all seem to be the same anyway. I've compared it to some hotels in my local town, and the prices for both options are the same. But at the Iceland hotels the pay now option is typically cheaper. In one instance I could save $50 by paying now for a 2 night stay. The pay now option is also cheaper than booking directly with the hotel.

So what are the difference besides the obvious? I did find a couple questions similar to this one, but they were only about having the same prices for both options.

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    Are there any differences regarding cancellation terms? – Traveller Feb 4 at 15:35
  • I use hotels.com (part of Expedia) extensively. The above linked Q&A pretty much covers it. – Michael Hampton Feb 4 at 22:15
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You could have several different reasons for the two options:

  • In one instance, it's just a matter of convenience for you. The price is the same, the only difference may be that the currency exchange rate changes between now and your stay (if the hotel's local currency is different from yours/your card issuer's). Remember that even if the price is quoted to you in local currency, the actual contractual price is usually the one in the local currency.

  • Another case (the most common, probably) is refundable vs. non-refundable rates.

    A non-refundable rate is usually cheaper, but you must pay right away, and you won't be able to cancel (or there could be substantial cancellation fees).

    A refundable rate is usually paid at the hotel, though a credit card will often be required at booking time to "guarantee" the reservation (it won't be charged, though something like a $1 authorisation -- not charge -- could be made to check the validity of the card). If you don't show up, or cancel at the last minute, you will usually be charged for one night. If you cancel early enough, no charge will be made at all. If you stay at the hotel as planned, it will be the hotel who will charge you.

  • Yet another case is when the booking site actually "buys" rooms from the hotel at a reduced rate. They can then sell the room at the same price as the hotel, slightly cheaper, or, in the most extreme case, lower than they bought it (if they still have the room available when getting very close to the date, and little chance of selling it). In that case, it's definitely the booking site selling the room, not the hotel, so they will usually charge you at that point. You can still have this option alongside regular bookings.

  • Should have mentioned in my question, apart from these 2 options, there is another that is a non-refundable rate. The pay now option actually does have free cancellations, up to a certain date. – Patrick St.Onge Feb 4 at 17:39
  • The exchange rate is a big issue here for many travelers. You can avoid a foreign exchange fee on your card by paying now instead of later, as you get charged in your home currency and Expedia does any required currency exchange on the back end before they pay the hotel. – Michael Hampton Feb 4 at 22:17

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