Traveling during holidays? What to know about the new DOT refund rules affecting airlines

The holidays are just around the corner.

Millions of Americans are preparing to hit the roads and skies for what's expected to be another record-breaking holiday travel season.

According to AAA, end-of-year holiday travel across the country seems on track to break national travel records.

The good news is that some new rules will help protect air passengers from unexpected changes to their travel plans.

With travel reaching new heights, the U.S. Department of Transportation has stepped in with new refund rules to help passengers get their money back if trips don't go as planned. The new rules, initially announced earlier this year, are now fully in effect for this upcoming travel season.

Here's how it works:

If an airline cancels a flight or delays it by more than 3 hours, passengers are entitled to an automatic full refund for that flight within a timely manner. That's seven days for credit cards and 20 days for other forms of payment.

“So they can't try to tempt you with a voucher or some sort of alternate future payment. You bought on a credit card, they have to put the money on the credit card and pretty quickly,” said travel expert Daniel Green, who is the co-founder of Faye Travel Insurance.

It must be a refund of your money so that travelers have more financial flexibility to book alternate travel options.

“Passengers deserve to get their money back when an airline owes them - without headaches or haggling,” Transportation Secretary Pete Buttigieg said in a statement when the regulation was announced this spring. “Our new rule sets a new standard to require airlines to promptly provide cash refunds to their passengers.”

But experts warn, there's a catch. For example, you can only get a refund for a major delay if you don’t take that flight and find another option.

"I think the most important thing to understand about this new dot rule is you're only entitled to these benefits if you don't take the flight,” said Green. "But that doesn't help you if you still want to take that vacation. So if you still want to take that vacation, I still think it's really important to understand that tools like travel insurance and travel protection are what will help you still get there."

Travelers should consider travel insurance coverage for their trip to help fill the gaps for the unexpected when a refund is not possible.

“I think sometimes one of the smallest and best benefits that travel insurance can give you is something called travel inconvenience, which is just an upfront cash payment when something goes wrong to smooth over that situation,” explained Green. “So sometimes when you see a delay of three or six hours, obviously it depends on your policy – but you can often get one $100 or $200 in cash, sometimes on the spot, just to spend at the airport to buy food for everyone, get a few extra toys for the kids and things like that. It can make a huge difference.”

Green added, “Travel insurance is for taking care of all those out-of-pocket expenses that you shouldn't have had to pick up.”

The new DOT refund rule applies to disruptions from weather, staffing shortages, or maintenance issues.

The rule also requires refunds for checked bag fees if the luggage is not delivered within a specified timeframe, which is 12 hours for a domestic flight and 15 to 30 hours for an international flight, depending on the length of the flight.

Passengers are also required to be compensated for non-functional or unavailable services that they paid for like Wi-Fi.

The DOT has also required airlines to be more transparent and to better update passengers in real-time about their options.

“The DOT has the ability to enforce these rules and they will fine airlines. You should speak up and complain if you find that airlines are trying to give you vouchers or they're just not refunding you in the timelines that are specified,” said Green.

Green adds that if you haven't booked your holiday air travel yet, you might be out of luck.

"I think booking tickets at the last minute is always a gamble. The days of being able to find last-minute bargains are fewer and fewer because airlines basically up the price as flights fill up," he said. "There can be some bargains to be found and there are people who will decide the night before and they'll get a good price. But generally, the best time to book your travel is three to five months out."