House Edge and Payback Percentage FAQ

To clarify issues further in our course on payback percentage and the house edge, here is a review of the basics in question and answer format.

What does house edge mean?

It is the average amount of money the casino makes off a particular game or bet, given in percentage. An example is 8% for an average slot machine. It means that on average, the house retains $8 out of every $100 wagered in the machine.

The house edge guarantees that the casino cannot lose money in the long run even if a few players win big. The majority will lose.

What is payback percentage?

It is the remainder after the house edge is taken. If the house edge is 3.5%, the payback percentage is 96.5%. This percentage of money wagered in a game is won back by players as winning spins, hands, rolls, etc.

The payback percentage is not distributed equally among players. Those who are either more skillful or just lucky win more.

Why should I be concerned with house edge and payback percentage?

Because these factors partially determine the costs of playing a game in the casino. The higher the payback percentage (and thus the lower the house edge) of a particular game or bet, the more you can win. Even if you lose, you will lose less. So it is wise to play games with high payback percentage.

Another important thing these figures show is that it is statistically impossible to defeat the house in its own games. If you play slots for years, or baccarat, or roulette, you will always end up losing more money than you gain unless you win a very big jackpot.

Why gamble at the casinos at all when there is a house edge?

Because anything can happen in gambling. The odds may be stacked against you scoring a proposition bet in craps, but it is not impossible. The chances of winning a progressive jackpot in slots may be ultra slim, yet you read of people winning them all the time. This is why people still gamble despite the house edge. There is always a chance of winning, and the smaller the chances of winning, the bigger the prize you stand to win. So why not take the risk?

Moreover, people like to spend money to have fun even if they never get it back. When you pay to watch a sports event, you don't expect to get your money back, do you? At least in casinos you have a chance!