What is the difference between the non-refundable and cancellation rule?

Non-Refundable is a pricing definition. According to the nonrefundable pricing, the customer is to pay the entire fee selected even if the customer cancels the booking later.

Cancellation Rule applies the deduction as part of the rule you have determined, in case the reservation is cancelled. When your customer wishes to cancel a booking, the rate difference calculated through the refundable price is deducted. This cancellation rule does not cover the nonrefundable price.

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