fluctuating exchange rates

Agencies and other headaches, keys and cleaners, running costs and contracts...in short, all the things we spend so much of our time doing behind the scenes.<br>
A-two
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fluctuating exchange rates

Post by A-two »

This is about accepting payment in more than one currency.

We quote rates in USD, then if someone wants to pay in GBP, which we also accept, I use the forex converter at oanda dot com and give them the typical cash rate of the day. If they agree, I write the contract in GBP and am then locked into that rate, even though I may receive only the deposit at that time, and full payment six months later, by which time, the rate may be vastly different.

I have always done it this way because I felt the tenants wanted to know exactly what they were in for, but that certainly doesn't apply to other aspects of their holiday, or if they were paying periodical payments by credit card. I'm now thinking the fairest for all is to stick to the USD price in the contract and send a new invoice with the rate of exchange that is current at the time the payments are due.

Whereas fluctuation between USD and GBP used to be fairly minor, if this past year is anything to go by, we're not talking about the difference of a few cents anymore. For a high season week booked 6-9 months in advance, the difference in the exchange rate could be as much as 300 GBP either way. Multiplied by several bookings, this is not a trivial matter on either side of the arrangement.

Anyone else have this problem?
Waves from America
Nessie
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Post by Nessie »

For us its a lot easier as we run chambres d hotes. Like you we quote in euro and if somebody wishes to pay in dollars or sterling we give a typical spot rate on the day plus any bank charges that will apply and use this to calculate the deposit. The balance in our case is not paid until the guest arrives and we insist that the balance is paid in our local currency. We did find this year with the dollar rate on the bookings we had from the states we lost about 10 euro per booking by the time the cheques were received and banked.
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alexia s.
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Post by alexia s. »

"Anyone else have this problem?"
Yes, Joanna. For several visitors I locked into the dollar early in the 2005 season (ouch!!) - never again! And yes, it was easily hundreds that we lost.
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Alexia.
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Alan Knighting
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Post by Alan Knighting »

We all want to receive our rents in full with as few deductions as possible.

How about stating prices in just one currency and taking all payments through PayPal?

When a renter makes a payment he would be subject to the vagiaries of exchange rates and the owner would bear the PayPal commissions.

Would that not deal with varying exchange rates and be a fair distribution of the overheads involved?

Alan
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paolo
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Post by paolo »

Joanna,

I only take payments in pounds, and at least 80% of my guests are non-UK. They pay by PayPal, bank transfer or bank draft/money order. As far as I know I have never lost a booking from people who were not happy with this. If I were renting in the US I would certainly expect to pay in dollars.
Paolo
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vrooje
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Post by vrooje »

Most people pay through PayPal and so we are paid in Euros. But occasionally a U.S. client will want to send us (in the U.S.) a check, so we do as you do -- go to oanda.com and use that exchange rate.

We don't ever lock in to a rate, though -- if they were paying via PayPal they would pay the exchange rate given on the day they paid, so that's the way we do it. We do quote approximate prices in the client's home currency, but make clear that these are estimates only.

The way the dollar has been fluctuating lately, I would be nervous about agreeing to use a rate over a period of months!
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Post by Fraise »

We take payment in sterling .We also state we take payment in euros but no-one has paid this way.People from other countries have sorted it out for themselves (mainly bank transfer).I did have a Paypal a/c but no-one has paid through that either yet.
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Alan Knighting
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Post by Alan Knighting »

Having previously suggested the PayPal route I must admit I have never offered it as an option. At an average charge of 4% the cost would exceed the annual cost of running my swimming pool and providing clean laundry each week, for what?

By and large, I state my prices in £'s sterling. In most cases I am paid by way of a £'s sterling cheque which I deposit in my British bank account. I also advertise on a French Website where my prices are stated in €'s so I occasionally receive payment in €'s in which case I deposit it in my French bank account. I leave it up to my other guests, from other currency zones, to get their local banks to issue a cheque in either £'s sterling or €'s. Never a problem!

I never feel myself subservient to my guests, why should I? I never feel that I should meet the guests' overhead costs in paying for a holiday in my property, why should I?

No more would I pay a contribution towards their costs of getting here. Their travel arrangements and how they pay for them are their concern not mine.

No more would I pay a contribution towards their costs of being here. Their living costs while here and how they pay for them are their concern not mine.

All these things are subject to fluctuating exchange rates and bank charges but I see no good reason for them being my concern.

Don't tell me it might put some people off. Those who want everything, but want someone else to pay for it are not welcome here in the first place.

I am sufficiently open-minded to change my mind or even pull out altogether if this became a stumbling block to getting bookings. Right now it is not!

Alan
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Post by Hells Bells »

Alan, a Paypal e-cheque costs just 5 euros a time. I've costed into the apartment price.
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vrooje
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Post by vrooje »

Is there a way to request/suggest that people pay through PayPal eCheck rather than a credit card? The fees for the two are vastly different -- I rejoice every time someone chooses an eCheck, since that's money in our pocket. I'd love to know how to encourage people to use it more often.

Of course, a direct request is always possible, but I am wondering if PayPal has some way to send a bill that favors one payment method over another.
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Alan Knighting
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Post by Alan Knighting »

Brooke,

eCheques sound interesting but to quote from the PayPal Website:-

"For PayPal members from the European Union, eChecks from a U.S. bank account will no longer be an option for funding your payments."

Oops!

Alan
A-two
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Post by A-two »

vrooje wrote:Is there a way to request/suggest that people pay through PayPal eCheck rather than a credit card? .

Thanks everyone for the feedback, which is useful.

Brooke,
I see many auction sites on eBay which will only accept non-credit card payments through Paypal, so I'm sure you could stipulate this in your terms and conditions. For those who use Paypal already, this ought not to be a problem.

Over more than a year of offering Paypal, I have only had one person acknowledge they have an account, most don't even know what it is. The one who has the account asked to pay that way and that was yesterday. This person is from PA, (USA) so I am not willing to lose 4% when he can send a check overnight by regular mail, and neither was he. He's sending a check. If someone doesn't have a Paypal account already, it's not practical to set up overnight to secure the booking, or is it?

Also Brooke, do you use the buy rate or the sell rate at oanda.com? I was using typical credit card rate, but I've switched now to typical cash rate.

Alan, I do the same as you about depositing the currency into different bank accounts in different countries, but like Alex, if I don't bring the money over to the US immediately, and instead leave it to build up to a larger amount, which is cheaper on bank transfer charges, (we get charged to receive as well as to send, so I'm getting hit at both ends), then I am subjecting myself to all the risk of the forex markets. I guess you probably just leave it there to use locally when you need it, whereas I need to bring it over here periodically to defer expenses. That's the point.

So how to write the lease .....well, I'm going to leave the deposit payable in GBP, which can then be returned as GBP. But the rent is going to stipulated in USD for conversion later. I'm therefore going to need additional language in the lease to clarify that I will accept USD in the agreed amount (by bank transfer or Paypal), or they may pay an equivalent sum in GBP, calculated using rates published at oanda.com on a date that is two weeks before a payment is due(to give them time to get it mailed by the due date). Would that do it, or am I making this harder work than it needs to be?

You know folks, I'm thinking this is yet another good reason to accept credit cards. I think it's $24.95 a month for a merchant account, (plus 2% of transactions), so all risk could be eliminated for $300 p.a. base cost. Given the volatility of the US$, that might be the prudent way to go.

ETA: I posted this before seeing Alan's reply above about eChecks.
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vrooje
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Post by vrooje »

Argh! PayPal is continually limiting their European accounts. I can't fund our French account from our bank accounts (French or US), either. How frustrating.

Joanna, I believe I use the bid median rate -- it's not usually a huge difference between bid/ask rates if you use the median. Honestly, I just sort of picked a rate and tried not to pick the most extreme one.

Oh and, I typically get my clients used to using PayPal because you don't have to have an account to send less than $750, and our deposit is less than that. So they send the deposit using PayPal, and after sending money once they usually feel comfortable enough to set up an account for the final payment.

I do agree that for our US clients, it's easier for us in the US to just accept a check. But for European clients I find it much easier to just use PayPal.
Brooke
A-two
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Post by A-two »

vrooje wrote:Oh and, I typically get my clients used to using PayPal because you don't have to have an account to send less than $750, and our deposit is less than that.
Thank You! That's GREAT news, as I thought anyone sending money thru Paypal had to have an account. Although our downpayment is usually more than $750, I could make it work for international.

I've just sent this poor woman in Wales a whole list of instructions for various options that are so complicated it will be a miracle if she can work out how to go ahead this side of Christmas!

Yep, I will definitely check out instructions for sending Paypal payments under $750, then at least they can put something down instantly, and as you say, there's then time for them to sign up for later payments.
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Post by Fraise »

Vrooje- I think I'm missing something (well,OK,I know I'm missing something!).Why can't European guests pay using euros-to go into your French a/c ??? :roll:

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