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Casino Gambling: What is the House Edge?

If you are going to gamble, you need to understand a very important concept: house edge. In plain man's language, the house edge tells us how much money the casino makes from the games they offer. House edge is often given in terms of percentage like 1% or 5%. The higher the house edge, the more the casino earns and the more gamblers lose collectively.

The same game can have different house edges depending on how it is played. Some video poker games have either a very low house edge like .5% or even no house edge if played with correct strategy, but it gets bigger if one plays badly. Craps bets can be as small as .02% or as big as 9%.

House edge is decided by two factors: odds and pay schedules (usually called payouts). Odds is simply the possibility of losses versus wins in the game. Pay schedules show how much the casino pays for wins. Naturally, the greater the odds against a certain bet winning, the bigger is the payoff it deserves if it does win.

To make money, casinos either pay bets less than they are really worth (as their odds show) or they change the odds by changing the setup of the game, or both.

An example of "unfair" pay schedules is this: In casino war, when the player and dealer face off with their battle cards, the player only wins half the doubled bet if he or she wins; the other half is a push. Yet if it is the dealer who prevails, the house wins the entire double bet from the player.

An example of changing the odds is as follows: In roulette, the European version has 37 pockets: 1-36 plus a 0. But American roulette has one more: the 00. So for the same one-number bet given above, the odds are now 37 to 1, yet the payoff is still 35 to 1. You are robbed 2 units instead of 1!

Casinos are not always free to change things as they want. In video poker, for instance, they can never add more cards or decks than what is really used in the game. That is why when casinos want to "tighten" their video poker machines, they can only adjust the pay table (i.e. pay rates). You can tell how big or small the house edge is by studying the pay table.

Slot machines are more deceptive. Two slot machines can have exactly the same pay schedule, yet the house edge of each may be different if the odds are. No one but the casinos and programmers know how the symbols in a slot machine are weighted, so the odds of these symbols hitting the payline is unknown to the public. Consequently, the exact house edge of slots are usually unknown.

House edge is one of the most important concepts in casino gambling. You should not only know the rules of a game, you must also understand the odds involved and the potential return to you as a gambler.