The House Edge

The house edge is why casinos open their doors and offer games of chance. It’s responsible for their profits. It’s how they make money on customer bankrolls.

Last year, casinos on the Las Vegas strip made more than $6 billion in revenue. Clearly, the house edge is a successful tactic casinos use to make money.

Definition of House Edge

The simplest definition I’ve come across is that it is the casino’s profit expressed as a percentage of each bet.

The house edge exists to guarantee a profit for the casino, which in turn allows them to offer big payouts and other goodies.

Any wager you place comes with a probability of winning and a probability of losing.

For example, a wager on the flip of a coin results in a 50% chance of winning on a bet of heads and a 50% chance of winning on a bet of tails.

Because the odds for each outcome are 50%, this is considered an even-money bet. You have every reason to wager one way as the other, and your odds of winning on either bet are identical.

How do casinos turn propositions like the one above into a profitable business? They don’t pay true odds.

Imagine the coin-flip scenario above, except you were paid $0.98 every time you win instead of the $1 you wagered. The other $0.02 go to the person flipping the coin.

Those two cents are, in this case, the house edge.

They represent the difference between the wager’s true odds (1 to 1) and the odds offered you by the casino (0.98 to 1).

What Is Payback Percentage?

Payback percentage is directly related to house edge. In fact, it’s pretty much a mirror image of it.

You’ll see payback percentages most often in the area of the casino set aside for slot machines.

In fact, I don’t think I’ve ever seen it used on any other game, except other gambling machines, like video poker.

Rather than advertise a machine as having a “5% house edge,” casinos found success by describing that game as having a “95% payback percentage.”

Presenting the game in terms of the player’s bankroll rather than in terms of the casino’s advantage makes the game seem more player-friendly.

Though payback percentages are most-often used on slot machines, it’s easy to take any game that you know the house edge for and present it in terms of payback percentage.

For example, a standard-rules game of blackjack played according to perfect strategy will result in a house edge of about 0.5%. Flip that number around, and that game of blackjack suddenly offers a “99.95% payback percentage.”

A Note on Casino Advantage and Payback Percentage

I want to take some time out to talk about an important aspect of this concept that is easy to overlook.

The house edge is a theoretical figure based on the rules of the game and an infinite amount of game outcomes.

A slot machine with a 98% payback percentage probably won’t take exactly 2% of your money after you play for ten or fifteen minutes.

Payback percentages and house edge statistics are long-term assessments of a game’s odds.

It is all too common for streaks to occur in luck-based games. A streak of three losses in a row will really throw off your concept of a games payout percentage unless you understand that payout percentages are theoretical.

Things get even trickier when you look at games with a skill element, such as blackjack or video poker.

For these games, the casino’s advantage will vary based on your skill.

A halfway-decent card counter will be playing with better odds at the blackjack table than a player loosely following a strategy card he bought at the gift shop. And that guy, the one at least attempting to play with strategy, will have better odds than a player betting entirely on instinct and emotion.

How Does the House Edge Affect Me?

The most obvious way you’re affected by the casino’s advantage – it’s the mechanism by which the casino takes your money.

If you opened a casino tomorrow paying out true odds, you’d go broke. Unless you opened an awesome steakhouse or something on the property and used gambling as a loss-leader. But that’s an extreme scenario, isn’t it?

The casino’s advantage turns your $100 into an hour’s worth of slot machine play and a couple of free beers. Each pull of that slot machine shaves a tiny amount off your bankroll.

For every dollar you bet on a double-zero roulette wheel, you stand to win back $0.94.

Casino Games Ranked by House Edge

The following table gives examples of popular games and the advantage the game gives casinos.

For all games of skill, I’ve used the house edge for players following optimal strategy.

**Except where indicated, all games are listed according to their standard Las Vegas rules.

Game	House Edge
**Baccarat (Banker)**Baccarat (Player)**Baccarat (Tie)	1.06%1.24%14.36%
Blackjack	0.5%
**Casino War (Go to War)**Casino War (Surrender on Ties)**Casino War (Bet on Tie)	2.88%3.70%18.65%
Craps (Pass/Come)Craps (Don’t Pass / Don’t Come)Craps (Any Seven)	1.41%1.36%16.67%
**Keno	20 – 40%
Let It Ride	3.51%
**Pai Gow Poker	1.46%
Roulette (American)Roulette (European)	5.26%2.7%
**Sic Bo	2.78 – 33.33%
Three Card Poker	7.28%
**Video Poker (Jacks or Better Full-Pay)	0.46%
Wheel of Fortune	11.11%

Two games on the table have a range of percentages. This is because these games involve a wide range of possible wagers.

How to Identify High and Low-Edge Games at a Glance

I know what you’re thinking: “There’s no way I can memorize all these numbers.”

You don’t have to.

I can teach you a simple way to identify a game in terms of its built-in advantage for the casino.

You won’t know the game’s precise payback percentage, but you will know whether it is generally a low-risk or high-risk game.

Slot Machines – As is true for a lot of casino games, you’ll find the best slots in out-of-the-way locations. Some casinos literally darken the area around their lowest risk slots so they look less appealing. Other casinos, like New York-New York, hide low-risk machines in the lobbies and bar areas where people do less gambling for a shorter amount of time. So you start finding low-risk slots by looking for machines that are placed away from the crowds. The next trick – play the slot with the lowest-possible value for a single credit. In most casinos in America, this amount will be $0.01/credit, or it may be $0.05/credit or a little more. My rule of thumb is to stick to games that cost no more than a nickel per credit. A final piece of advice – to get the best return for your investment, you’re going to be betting the maximum number of coins. That means a “penny slot” can quickly become a $0.30/spin slot, or even more.

Video Poker – Video poker pay tables make the task of finding a low-risk video poker machine a snap. If you’re playing Jacks or Better, for example, you should only play on what’s called a “Full Pay” machine. Full Pay refers to the pay table’s designated payout for a full house (9) and a flush (6). This pay rate is the highest available in the game, and ensures you get the longest time playing.

Blackjack – Every blackjack game in every casino is going to have slightly different rules. Sure, a standard set of rules exists, but even that varies from one region or one country to another. Depending on where you do your blackjack play, you may not have many options in terms of table rules, either. Small casinos may have just one live table available, or even just an electronic version. While it’s tougher to identify a low-risk blackjack table than either of the other games in this list, it can still be done. Be wary, for example, of any blackjack payout that’s not 3:2. 6:5 is not the same as 3:2. None of the common alternatives to a 3:2 payout for blackjack are worth your time. Run far away from any table you see offering anything except a 3:2 blackjack payout.

Re-Thinking Casino Advantage

Since this is an unbeatable force built into the fabric of casino gambling, your best bet in dealing with it is to re-think gambling altogether.

On my annual Christmas trip to Vegas this past year, everything was perfect.

I spent the perfect amount of time – not so long that I got bored, not so short of a stay that I felt dissatisfied. I had my two best friends with me. We ate at amazing restaurants. Nobody drank too much. Nobody broke any laws. And I stuck to video poker and won a tiny bit of cash. I went home relaxed and refreshed.

In short, I had an absolute blast.

I realized that the casino’s advantage is nothing more than the fee they charge to keep me entertained.

The pennies the casino expects to earn from you when you place an even-money bet on roulette is the same as the price charged for a movie ticket, a tee-time at the golf course, or a spot in the cake walk at the school carnival.

The question shouldn’t be “How can I beat the house edge?” It should be “How can I have as much fun at the casino for as little money as possible.”

I’ve had buddies make fun of me for taking this Zen approach to casino gambling, but since I embraced it, I’ve had more fun and lost less money while gambling.

My New Approach to Casino Gambling

Remember that the name of the game for me is playing as many games as I can (and having as much fun as I can) while spending as little as possible.

Let’s start with the low-spending part. The quickest way to limit your losses is to stick to games with a really low built-in casino advantage.

These days, I only play the best games in terms of odds. That’s the first step to what my friends refer to as my Zen method.

You can do this, too.

Consult the table above and find the game with the lowest house edge.

Are you surprised that it’s a video poker game? It’s true – provided you play optimal strategy, the casino only expects to make about $0.05 per $1 you wager.

Other games that give the house the lowest possible edge: baccarat (except the Tie bet), craps (Pass/Don’t Pass, Come/Don’t Come), blackjack, and European (single-zero) roulette.

The main games I avoid are machine games (sorry, slots fans), casino-style poker games, and gimmick or specialty titles with lots of flashing lights and pretty girls gathered around.

I stick to video poker (on games with advantageous pay tables), craps, blackjack, roulette, and head-to-head poker.

To make sure I’m playing as many games as I can, I research a casino beforehand to find games that offer low-denomination wagers.

For example, I know that the El Cortez has a single-deck blackjack game available for a minimum bet of $5. Because this game uses just one deck, and thanks to generally-liberal Vegas blackjack rules, it’s said that this game gives the house an edge of just 0.19%.

Next I work out how much this game is likely to cost me.

At $5 a bet, and given an average game speed of 60 hands per hour for a full table, my total outlay will be $300. Since the house edge is estimated at 0.19%, I can expect to lose about $6 per hour of play.

I know I’ll tip the dealer $10 an hour. If I lose just $6 an hour and play for three hours, that’s $48. I’ll probably have a snack or a meal, so there’s another $10. All told, I figure a night of blackjack play at the El Cortez will cost me about $60. Hopefully I can snag a free meal, free parking, or some other goodies to cut into that cost a little.

But I think it’s a steal, even at the full $60. I get three hours of a game I love, along with a meal and some decent camaraderie. $60 isn’t even enough money for me to go to a baseball game these days.

I can’t really complain about having a blast (and potentially winning a little cash) for less than the cost of a new Xbox game.

Though we don’t like the casino advantage, we wouldn’t be able to play the games we love without it.

Every gambler has heard himself repeating the old mantra: “You have to play to win.”

Unfortunately, in order to play, we have to pay the casino a little something for the trouble.

If you think of casino advantage as nothing more than the cost of doing business, you’ll have more fun and get less frustrated on your next casino adventure.