The Ultimate Guide to Reward Travel: Chapter Two

The most detailed guide to earning and using frequent flyer miles, hotel and credit card points for reward travel.

What You’ll Learn in Chapter Two

  • Why earn points?
  • Are flights really “free?”
  • What are “free” hotel nights?
  • What are the taxes and fees for reward flights and hotels?

How can you get the most value from your points? Reward travel! Exchange them for nearly-free airfare and hotel stays. We walk through exactly what that means, what is and isn’t free, and how to think about what type of travel you can get with points. Simply earning points is useless if you’re not ever going to use them!

2.1 “Free” Flights

The word ‘free’ is often used to describe reward travel. That’s a bit of an oversimplification, because there is usually some cash cost associated with the redemption, to cover taxes. More on that in a moment.

Rewards can be redeemed to cover the cost of the base fare of flights. Most airlines have a “zone-based” award chart, meaning that any flights between the same two zones will cost the same number of points, no matter the actual distance.

For example, one zone is the Continental United States (as it is for most programs). Then a flight from New York to Boston will cost the same number of points as a flight from New York to San Francisco, if both are options on the carrier.

In contrast, some airlines have a “distance-based” award charts. Meaning the reward costs are based on how many miles are between the two airports.

For example, a flight from Atlanta to Charlotte will cost fewer reward points than a flight from Atlanta to Denver.

2.2 “Free” Hotel Nights

Rewards can be redeemed for free hotel nights at most major hotel chains. This can be literally cash-free; meaning at many properties you can check-in, go to the hotel pool, stay the night, get your complimentary breakfast in the morning and checkout with a zero-dollar bill.

The amount of rewards required for various hotels is usually tied to the hotel chain’s internal ‘category rating’ for their properties. The higher tier or higher category hotels will cost more points. Unlike a ‘star’ system that can be somewhat universally applied, hotel reward categories are created by the hotel chain. It varies greatly from program to program. A top tier property in one program might be a category 10. While in another program the top rating might be category 7, and those could be ‘better’ properties. You can only evaluate hotel categories within a single program at a time.

2.3 Taxes & fees

As we mentioned above, rewards redeemed for flights cover the “base fare” cost. This is the largest chunk of the cost of flights. You will, however, need to pay mandatory taxes and fees. These are specific to the reward program you are using, as well as the departure country and airport; therefore, the tax amounts vary. For example, you will typically be charged a $5.60 tax each way on all flights in the US. Therefore, if you fly roundtrip from New York to San Francisco, you will pay $11.20 total.

Hotels, on the other hand, do not require mandatory taxes in all situations, but each hotel is different. If you have to pay any cash for hotel stays, it will be dictated by the city or state the hotel is located in and whether or not there is a “resort fee” (think towels, water, etc.).

Lastly, we must mention the dreaded fuel surcharge. These are fees that airlines have chosen to tack on. They can be quite high for some carriers. Even when you use rewards to cover the base fare, some programs will charge hundreds of dollars in extra fees. Make sure you watch that closely when planning. If there are any hotel or airline cash fees on a redemption you choose to make, pay with a card that earns a travel category bonus.

So, outside of what’s normally just a few dollars in taxes and fees, you can travel for free. How on earth does anyone make any money if you’re traveling for free? That’s up next.  Read on…