What is House Edge?
Updated: May 27, 2024
Published: May 27, 2024
Playing online casino games has become a favourite pastime activity for many individuals. The thrill and enjoyment that come from them take the experience to a new level, with the opportunity for the players to earn money.
If you are someone who enjoys online casino gambling, you know there are good days and bad, and that is what makes everything related worthwhile. But have you ever wondered how casinos make a profit?
The simple answer is ‘players losing their bets act as the earnings of the casino’. However, that’s not it. Each casino is designed strategically with an intrinsic advantage that favors the house. That advantage is called the house edge, and that is what this page will delve into, exploring its mechanics and even strategies that can potentially help to overcome it.
House Edge Explained
A house edge can be defined as the strategic advantage that a casino holds over its players in any game it hosts. This built-in advantage ensures that the casino makes profits over time. Essentially, the house edge controls the variance between the actual odds of a game and the payout odds offered to players.
This confirms that the casino will earn a portion of wagers placed by bettors. Despite individual results varying, the house edge guarantees over-time profits to casinos.
It is also noteworthy that the house edge is not the same at all casinos. You will see the figures vary depending on the game that you play along with the bets that you place.
For instance, you can see a house edge of 0.5% on blackjack that involves standard gameplay. However, the wagers that you make in the game can substantially increase the house edge. There have been instances of casinos receiving the advantage of up to more than 10%.
How do Casinos Calculate House Edge?
To calculate the house edge, casinos determine the difference between the house edge and the odds of winning a bet and the payout odds they offer players.
The mathematical calculation used for the same is specific to each game, like, in the case of roulette, it is calculated by taking into account the number of pockets on the roulette wheel and the payout odds for different types of bets.
Similarly, in blackjack, the house edge is determined by the rules of the game and the strategies used by the players. These factors help casinos determine the profits they can earn in the long term.
Let us take an example of roulette that uses the European wheel to calculate the house edge –
- So, as a given, the ball can land only on one number on the roulette wheel
- The wheel contains 37 slots, which constitutes the chances of winning as 1/36
- For roulette, most casinos offer the standard payout of 35:1 for a win
- This makes 35:1 the actual odds for a win as opposed to 36:1, the extra unit represents the casino’s advantage
To determine the house edge in percentage, the following formula is relevant –
- 1 x 1/37 = 0.0270270 x 100 = 2.70270 (2.70%)
So, for every INR 83 ($1) you spend while playing roulette, the casino will reserve 2.70% as house edge over time.
Real Odds vs. Actual Odds
While playing online casinos, you expect there to be better odds, as there are factors like house edge and RTP to be considered.
However, with real and actual odds being prevalent, too, learning what these elements mean can help you understand house edge better.
- Real Odds: Real odds represent the actual probability of an event occurring. They are based on statistical likelihood without any house advantage.
- Actual Odds: Actual odds are the odds that the casinos offer their players for a bet. These are less favorable than actual odds and help casinos make a profit.
Let us take the example of European roulette to understand the odds better. There are 37 pockets on a roulette wheel, with numbers ranging from 1-36 and a single 0. So, the real odds of the roulette ball landing on any specific number are 1 in 37. The probability of winning thus becomes 2.70%.
In terms of actual odds, what you should know is that most casinos pay out 35:1 for a single-number bet. In case you wager INR 100 in a single number and win, the casino will pay you INR 3,500, plus return your INR 100 bet, taking the tally to INR 3,600.
With real odds, you can expect to win a guaranteed 50% result, which can be a win or a loss, since there is no house edge. In the case of actual odds, however, the casino will reserve a house edge of 2.70%, as stated, as it needs to protect itself. So, if you win the bet on a wager of INR 100, your expected value will be INR 97.30.
How to Tackle House Edge at Casinos?
After looking at the above stats, it is fair if you are wondering whether there are ways to tackle house edge. Sure, there are, but such casino machines are rare today.
Here are some of the alternate strategies that you can use to alleviate the portion of house edge –
- Select games with low house edge: Any casino game with a house edge of under 2% is a win. Blackjack games tend to have a house edge of 0.5%, whereas some variations of video poker offer a house edge of 1% with optimal play. You can also alternate between baccarat and craps that carry house edge of 1.06% and 1.41%, respectively
- Manage bankroll: Setting a budget and setting limited bet sizes can help you manage your bankroll effectively. Set limits on losses as well as wins to manage your gaming sessions
- Learn optimal strategies: Games like blackjack, craps, and video poker advise players to stick to simple bets with the lowest house edge. You can also draw up personal strategy charts based on the game variation you are playing
- Bonuses and promotions: It is also important to take advantage of the bonuses and promotions, as they help to boost your bankroll. Free spins, loyalty programs, etc. can help you earn cashback and other rewards
Conclusion
House Edge is an integral part of online casinos and is aimed at ensuring that casinos maintain a statistical edge over players. This advantage guarantees profitability for casinos in the long run.
Understanding House Edge enables you to make informed decisions about the games that you should play and how to manage your bankroll effectively. While house edge cannot necessarily be eliminated, it is advisable to take advantage of the bonuses and promotions to mitigate its effectiveness.
