House Edge

House Edge

Casinos are places for punters to have fun, but keep in mind that these exciting gaming venues are also a business. As former Vegas World Casino owner Bob Stupak described, the casino’s duty is to get as much money as possible out of customers and send them home with a smile on their faces.

But how do casinos go about getting their hands on your money? Don’t worry – they don’t cheat you, because they have a built-in advantage on each one of their games, except for blackjack and video poker. The odds are stacked in casinos’ favour. Therefore they tend to defeat you in the long-run. This built-in advantage is known as the ‘house edge’.

House Edge Explained

The house edge can be interpreted as a casino’s average built-in profit from a gamer’s bet. Whenever you place a bet, you have a certain probability of winning or losing. For instance, betting on the flip of a coin presents a 50-50 chance of heads or tails. This is what is called an even money bet. If your stake was £1 and you received £1 when you won, you had been paid true odds. Nevertheless, if a casino only awarded you 95p rather than £1 when you won the bet, the casino was benefiting from a house edge of 5%. In other words, the difference between true odds and the odds that winners are paid equals the house edge.

The game of American roulette sees a house edge of 5.26%. The casino game features 36 numbers as well as the 0 and 00 slots. It means the odds of the player winning is one in 38 or 37 to 1. If you are a winner, you will receive £35 for your £1 bet from the casino. You get to keep your £1 stake and are given an extra £35 returning £36. The £2 difference creates the house edge of 5.26%. As a result, a player could technically cover all the numbers on the layout and still loses money.

The house edge reflects how much casinos will profit on average. Casinos are always the winner in the long run; the more time a player spent on a game, the closer their losses will get to the house edge. Take American roulette as an example again. Statistics show that between the first and 100th time a player places a bet, the results are pretty unpredictable. You may still be winning even after 100 rounds. But as you keep wagering, you become more and more likely to lose. When it gets to the 100,000th time you place a bet, your percentage loss will be more or less the same as the 5.26% house edge. Therefore, if a casino’s roulette players have wagered a total of £1 million in an evening, the casino will be expecting a profit of about £50,000.

The Grind

Now you’ll probably be asking: if a casino only gains a profit of 5.26% on American roulette, how come so many players end up losing 100%? Bear in mind that the house edge applies to your wagering amount instead of the amount of money you bring to the gaming floor. Imagine you have £100 with you and you place a £5 bet on each spin of the roulette wheel. You are wagering around £150 per hour, more than the amount you brought with you since you are placing bets with your winnings. This means you’ll have wagered £1950 if you manage to last 13 hours in the game. As 5.26% of £1950 is £102.57, the amount you’ve lost is almost the equivalent of what you brought to the casino.

Such a continuous, gradual reduction of your bankroll is what is referred to as the grind. To combat the grind, one strategy is to go for games with a lower house edge for a shorter duration.

House Edge of Common Casino Games

The house edge of games based solely on luck, such as slot machines, roulette and big six, is fixed as there are fewer variations in the outcome. The roulette wheel will always have 38 numbers, and there are always 12 numbers on a pair of dice. The result will not change because of decisions made by players.

Games that require skills have a flexible house edge. In blackjack, for example, the makeup of the remaining cards changes every time a card is dealt. The cards played as wells as the skills of the player heavily influence whether the house or the player has the advantage. The house edge for blackjack is 0.5% if played properly using basic strategy, but an average player usually plays at about a 2 to 3% disadvantage.

Your skills also play a huge part when it comes to video poker. The house edge for the game varies between 0.5 to 5% with proper play, but if a player is guessing instead of using a strategy card, they are likely to get worse odds.

Generally speaking, the house edge increases if the player is not playing with the correct strategy, and harder games often come with better odds.

Why Still Play When There’s a House Edge?

If the house has the advantage most of the time, does that mean there’s no point to play at all?

Although the odds are against you, it doesn’t mean you will lose every time. Otherwise, nobody would keep coming back to the casino. It is possible for you to get heads twice in a row from two coin flips even when the odds are not on your side. Of course, if you keep gambling at a casino for 365 days, by the end of the year, it’s no surprise that you’ll be seriously in the red. But if it’s just a weekend trip to Vegas, you’ll undoubtedly have a chance to win even if the house has the advantage.

Also, if you are a cautious gambler, gambling at a casino can be rather affordable. For example, a knowledgeable blackjack player playing at a £5 table is only going to lose £2.50 per hour. They will bear a total loss of £7.50 per hour if they tip £5 each hour. That’s even cheaper than a cinema ticket!

Now you can see why casinos don’t have to cheat to make a profit. You’ll tend to lose less in games with a lower house edge; therefore it is often said that a smart gambler favours low-edge games and avoid games with a high edge. However, you’ll always have a chance to win despite the advantage the house has. It’s just that the casino will win in the long run by making a profit of a few percents on each bet.