Is a Free Trip Really Free?

Is a “free” trip booked with loyalty rewards points and miles really free?  That is a fair question.  The short answer is YES.  The longer answer is YES, if you’re doing it right.

If you’ve been following any blogs or articles about redeeming miles and points for free flights and hotel stays, many of them will talk about hidden fees and taxes.

Let me show you what that really looks like and how 100% of your awards trip can be free. That means zero cash out of pocket, if you choose.

The Truth About Fees and Taxes

In the vast majority of cases where you redeem awards points for travel, there will be some fees and or taxes. These fees and taxes can vary greatly depending of the kind of travel being booked.

The most notorious are probably the fees and surcharges for flying in and out of London. Often these fees for redeeming a free flight can cost more than the price of a discount economy ticket from the US. That equals hundreds of dollars for that “free” ticket. But this is an extreme example and one that is widely known in the travel hacking community.

Most taxes and fees however are much more reasonable. Here is an example from a trip I booked for travel in December 2018. I booked two round trip tickets from LAX to Honolulu and three nights in a beachfront hotel.  All using points and miles.

I booked the two flights on American Airlines using American’s AAdvantage miles. Once I booked the tickets, I was charged a $11.20 per round trip ticket. So total cash outlay was $22.40 for two free round trip tickets to Hawaii.

The hotel I booked was not part of a major chain, so I could not use the hotel loyalty points I had accumulated.  But this was not a problem.  Airlines have booking capabilities on their websites that allow you to use accumulated awards miles to book accommodations.I had a lot of miles on United so that is what I used to book the hotel.

After booking, United charged me $109.53 in tax recovery charges and service fees.

So, at this point, my Hawaii trip is costing $120.73. Not bad, but it can still be 100% free.  

How Taxes and Fees Can Be Covered

Being charged taxes and fees are inevitable. But that doesn’t mean that they must cost you money out of pocket.

Many credit cards award bonuses that are either very flexible transferable points or in cash back rewards. In either case, these points can be used to pay for your fees and taxes. Just charge the fees and taxes to a card that has transferable points or cash back and then erase the charge with your points.

This strategy is best when using a cash back card. If you have a card that awards you transferable points like cards from American Express or the Chase Sapphire cards, you may just want to pay the fees and taxes out of pocket instead of using transferable points.

This is because transferable points are the most valuable of all rewards currencies because of their flexibility and ability to be transferred to a variety of partners (I’ll cover this in more detail in another post).

I could have used points to cover the $22.40 that American charged me, so that is what I did.

For my hotel booking, United automatically covered the taxes and fees with miles. Not all booking options will do this but United does. So not only was I charged the miles for the hotel stay, the necessary miles were also deducted to cover the $109.53.

Conclusion

It is true that redeeming points and miles can result in fees and taxes. But that does not mean that a points or miles redemption needs to mean cash out of pocket. Always remember that there are several ways to cover these fees and taxes with points and miles if you choose.The choice is yours.