October 18, 2022

How Online Casinos Make Their Money: Know the Secrets!

Liam O'Sullivan
Written byLiam O'SullivanWriter

Have you ever wondered why casinos never go broke even when players win millions in a single week? Put it this way; the casinos are guaranteed profits whether players win or lose. But for the average gambler, it’s not clear how casinos manage to stay afloat when businesses are crumbling everywhere. So, this article unravels the secrets behind how casinos make money. Don’t worry; they don’t rig out players!

How Online Casinos Make Their Money: Know the Secrets!

How the house edge works

There’s a common saying that “the house always wins.” There is some truth in that because each casino game you play gives the online casino a mathematical advantage in the long run. Usually, this advantage ranges between 1% to 5%, although it can be as low as 0.50% in games like blackjack and as high as 12% in slot jackpot games. So, the lower the higher the house edge, the more the house wins in the long term. 

Here is a practical example of how the house edge favors the casino. Assuming you want to play a slot machine with a 97% return to player rate. This means players can win a maximum of 97 credits out of 100. Using this logic, you can easily calculate the house edge by subtracting the RTP from 100%. 

Now that you know the game has a 3% house edge, proceed to calculate the average amount that you’ll lose per hour. For example, you’re making 300 spins per hour with each spin costing you $2. In that case, you’re looking at an expected hourly loss of $18, assuming you win all your spins which is unlikely. You can see that the higher the house edge, the more the casino reaps from players. So, play games with a maximum of 4% house edge. 

Free lunches are not free

Most players would do anything to  join a casino with the biggest welcome promotions and frequent loyalty programs. Don’t blame them because the idea of playing with free money can be irresistible. Just make a minimum deposit and claim the bonus money which may also include free spins. Sometimes you don’t even have to deposit anything to claim the welcome bonus. 

But bonuses are not freebies per se. These packages often come with strings attached, primarily wagering requirements. The casino will often specify that you should play for a specific number of times using real money before cashing out the bonus. For instance, the terms can specify that you play 30x with a particular minimum/maximum amount before cashing out.

The thing is that bonuses ensure that you play for longer while the house edge is busy in the background. If the games you play have unfavorable house edge rates, it means you’ll lose more than you  win with the online casino bonus. This is the reason why some players skip claiming bonuses altogether. But if you must claim it, ensure that the wagering requirements are achievable. 

Tournaments are cash-cows for the casino

Seasoned casino players know that operators don’t waste to invite players to tournaments. A new tournament will start immediately and an existing one ends. Even better, they can run daily, weekly, monthly, or weekend tournaments. The most common tournament games are slot machines and video poker, where the top three or top ten players can win a prize. 

Note that tournaments use a completely different format from traditional casino games. Although the chips don’t have any monetary value, the casino will introduce a tournament buy-in. This is the amount players pay to join a poker or slot tournament. In poker tournaments, there’s also an option to “rebuy” which is essentially purchasing more game time. This money goes into the pockets of the casino. 

Look at this; a casino can run a $100 poker tournament with a $130 buy-in. The extra $30 is the rake or admin fee, and doesn’t contribute to the overall prize pot. The money is used to cover organizing expenses. Therefore, always play tournaments with lower rakes. Also, if 100 players are participating in the tournament and the buy-in is $130, the prize pool should be at least $10,000. Don’t settle for less!

Don’t forget the commissions

The commission is another devil that most players have to live with. This is usually the money charged on the winnings you make on a particular bet. Roulette’s Banker bet is a good example where players must pay a 5% commission on every win they make. That’s probably because this bet has a lower house edge than the Player bet. 

Another game where you’ll have to part with 5% of your winnings is Pai Gow Poker. In this game, the online casino has a theoretical advantage of 2.8%, which increases by around 1.3% with the 5% commission to the house. 

Sadly, there’s little you can do to skip paying the commission. If you’re not the greedy type, play the Banker bet and enjoy more wins than on the Player position. On the other hand, play commission-free Pai Gow Poker games like EZ Pai Gow and 6-Card Fortune. But be careful because the house edge could be higher. 

It’s all about math!

Without profits, most casinos wouldn’t offer bonuses and other promotions that players enjoy. By now they would have called it a day after paying players their jackpot wins. Believe it or not, these profits make the casinos play it fair since they are assured of their cut at the end of the day. 

But as a player, don’t make it too easy for the casino to win your money. Carefully select games with the friendliest house edges, rakes, bet limits, and, if possible, play commission-free bets. Remember, even a 0.10% house edge is an advantage to the house.

About the author
Liam O'Sullivan
Liam O'Sullivan

Liam O'Sullivan, an Irish digital maestro, seamlessly fuses his impeccable command of English with an enthusiastic penchant for online gaming. Highly regarded for his localization expertise, Liam fine-tunes online casino guides, ensuring they resonate profoundly with the diverse English-speaking populace.

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