Pay out rates? How do casinos make a profit then?

**Vincent** · 02-27-2005 10:58 PM

Hi all,

I have been wondering now for a little while how casinos make a profit. Just bear with me for a second before laughing out loud at my post

We all know (or at least assume) that casinos make a profit. But when one takes in consideration their payout rate and the cost associated to run the casino, especially the cost to accept credit cards, it is not as obvious as you may think:

Let's take this hypotetical scenario:

Let’s assume that players deposit 1000$ in a particular casino and that this casino has a payout rate of 98%
Therefore 980$ will be paid back to the players over time and the casino will makes a gross profit of 20$.

Now, when you take in consideration that when a casino accept credit card payment, they are charged on the actual ammount of the purchase (on the 1000$) at a rate of around 5%. (that’s the average for casino merchant account, I did a bit of research). Therefore on $1000 purchased by credit card, the casino has to pay 50$.

Do you see my problem – the casino makes 20$ net but is charged 50$ to accept the payment?

I am sure I am misunderstand something somewhere along the line.

What do you guys think then?

Vincent.

**casinogames** · 02-27-2005 11:44 PM

If you start with $100 and make $10 repeated bets in blackjack with a payout rate of 98%, you are likely to end up with only $10 after 450 hands.
(The casino keeps on average 20 cents of every $10 bet).

The truth of the matter is that in the long run, the house always wins....

**LasVegasLady** · 02-28-2005 12:40 AM

Originally Posted by casinogames

....The truth of the matter is that in the long run, the house always wins....

Definitely! Just take a look at all the billion dollar casinos in Las Vegas .... they were not built on the money the winners took home .... they were built on all the money the losers left behind.

and .... I can guarantee the casinos are not paying 5% to accept credit cards.

I have a merchant account and I only pay 2%.

The casinos do far more volume than I do, so I imagine they are able to negotiate an even better rate.

**Simmo!** · 02-28-2005 02:53 AM

I'd add also that the profit is on the "wagering" rather than the "deposit". If you deposit $100 and wager it x10 (ie $1000 of bets), the profit of 2% is on every $100 of that $1000.

Also - don't forget the law of the gambler states that "he/she will continue to bet until there is no money left"

Cheers

Simmo!

**Vincent** · 02-28-2005 02:37 PM

Ah

- I am stating to understand.

The 2% profit a casino makes is on the money wagered and NOT the deposits.

But I am still a bit confused?

How is the money wagered calculated?

Any input you can give me?

Vincent

**burgi82** · 02-28-2005 04:10 PM

amount wagered is equal to the number of bets times the average size of the bet.
For example, if you have a player who plays blackjack for example and bets $20 per hand. One day, he plays 500 hands of blackjack and betting $20 per hand. On that day, he wagered a total of $10,000 (500 times $20).

Hope that helps,

burgi

**Vincent** · 02-28-2005 04:13 PM

Thank you for that, it helped

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