Casinos have a house edge. Do you as a casino player must know what house edge is? Not necessarily, but it is never a bad idea to know more about what casinos do and don’t do in practice. With this article we will try to explain this term in very simple words. In a nutshell, the house edge is about the payout of casinos, more specific: casinos do not pay out the actual odds of winning. You should think: they cheat but that is not an issue here. Casinos pay less because that is their profit! The houseedge varies from game to game.
In general, you may assume that the winning odds, so the chances to win money with slots, are the worst of all casino games. That is a firm statement. To illustrate this, most articles on this subject make the comparison with the roulette game. By betting on a single number in Roulette, you have a 1 in 38 chance of hitting your number. So the payout range is 35:1. Comparing this to slot games, you will achieve a result usually bordering on something like 1 in 200,000. That number may seem enormous, but these slots tend to pay out more than 35 to 1. For example, hitting the top prize could pay out 8,000x your original bet, which means, if you bet $10, you could win $80,000! In other words: the odds of winning a top prize on a slot machine is a extremely difficult but if you win, you can win a lot of money depending on your bet placed. For that reason, slots are built with specific payouts based on probability and odds. Since these machines are less likely to pay out top prizes, they are more likely to pay out smaller prizes more frequently. That's an excellent marketing strategy: players like to often win small amounts. That makes playing exciting and makes them return regularly, online or in a brick casino, to try their luck. Slot players enjoy frequent wins!
This is the hard reality: in all gambling, the player does not get paid enough for a win to make up for his losses when he/she does not win. This difference is called the house edge. There is often confusion about terms used to describe the house edge. Terms as ‘house advantage, payback percentage and expected return’ are different words for describing the same basic idea: the games are set up in such a way that, in the long run, the house will always make money from the game. To clarify this issue, summarize it as follows: the house edge is the percentage of money that the player can expect to lose on each bet, averaged over the long term. In terms of ‘payback’ you could say: the payback is the percentage of money the player can expect to get back from each bet, averaged over the long term. The payback rate for slot games is less then 100% in almost all casinos, so it means that on average the player will lose money. There is therefore a psychological reason why casinos are more likely to describe their games in terms of payback percentage. With the payback% they emphasize what the player gets back (e.g. 96.7%) rather than what the player does not get back (e.g. 3.3%). The first one sounds much more positive!
• A 90% payback does not mean the player wins 90% of the time.
• It does not mean the player wins back 90% of what he/she has lost.
• It does not mean that the player gets back 90% of what he/she started with.
It means that, for each bet, the player loses 10% (being the house edge). Read the following example carefully! In the process of losing $100 on a 25-cent machine (over the course of 2 hours, assuming 75 cents per spin, 10 spins per minute), the player will actually make about $1,000 in bets. A 90% payback means the player loses 10% of what he/she actually bets. 10% of $1,000 is $100. And now it comes: a loss of $100 is a 90% payback! So the 90% payback is 90% of the $1,000 the player bet, not 90% of the $100 that the player started with. The main reason why players often lose most of their money, even when the payback is 90%, is that they reinvest their winnings (back) in the game. Golden rule: players who keep reinvesting their winnings will eventually lose it all. A payback of 90% means losing 10%, on average, of what is actually bet. However, if gambling simply meant losing 10 cents on each and every $1 spin of a slot machine, no one would still play! But gambling is based on ‘uncertainty’. Sometimes you win, sometimes you lose. On average, players lose, but often they do in fact win, at least in the short term and at least a small amount of money. It is this occasional win that makes players get on playing. At that moment of excitement, the actual casino house edge is not important for them!
The house (=casino) achieves its edge by paying back less than the true odds of winning. In other words: the total payouts reflect less than the true odds of winning. In many games, the house edge is hidden so that the player cannot exactly determine the casino house edge. The house edge is accomplished in different ways for different games. The total payback percentage is usually between 90% and 97%. Notice how most of the payback is returned to the player in the small prizes, not the large prizes.