What if someone was building a machine that you can deposit money into and get 96% of it back on average? You'd call that person crazy, right? Who would use the machine?
Add some sound effects, spinning reels and animation; now you've got machines that generate 70% out of $45 billion US gambling industry (video poker, video keno and such are included in that figure).
Slots are a fantastic business for casinos; they have a high house edge and play fast (some play over 800 spins an hour). They cost about $10,000 a piece, so the machine often pays itself back in weeks.
How Big of an Edge Do They Have?
To drive our attention away from the lousy house edge, slots provide the chance to win big-time - in fact, you might become a millionaire playing progressive slots. But the chance to win a life-changing prize comes with costs since progressive slots have the highest house edge out of all slots.
House edge (calculate it by subtracting slot machine's payout percentage from 100%) determines how much of a player's bet goes to the casino on average. For example, with a 5% house edge (in other words 95% payout), casinos make 5% out of your bets in the long run; short-term you may win a jackpot, of course.
Here's what this means: for every $10 bet you make, for example, you'll receive $9.50 of it back because 5% goes to the casino. Of course, you won't lose that 5% with every bet; you either win something or lose the bet. But in the long run, after tens of thousands of spins, you should have lost about 5% per bet.
Beginners often assume that the amount they play with is what they'll lose 5% out of. In reality, what you wager is what counts. You may have only a $100 with you, but if you play a dollar slot for 30 minutes at a rate of 600 spins an hour, you'll have wagered $300, and therefore lost three times what you would lose by just betting that $100.
A typical casino will have slot machine payouts anywhere from 82% to 96% (some online slots have it close to 98%). Real-money slots have minimum payout limits depending on the jurisdiction; 75% in Las Vegas and 83% in Atlantic City, for example.
Unfortunately there's no way of knowing the payout percentage of individual slot machines since casinos aren't required to display them - and rarely has a casino showed slot machine payout figures voluntarily.
Las Vegas casinos are forced to report monthly returns on slots, however, these reports include video poker and video keno machines as well, making it impossible to tell what the returns were from slot machines only. Additionally, mega jackpots, the ones that happen once in several months, may skew the returns.
By the way, "return" is different from "payout"
In 2003, Michael Shackleford (also known as "Wizard of Odds") did a survey on nickel slots in Las Vegas. According to the study, payouts ranged from 85.02% to 93.43% (source).
You may see advertisements for slot machines with "payback up to 97%" or something similar; beware of these machines, or at least expect not to play with 97% payback because that's not what the advertisement promises.
"Payouts up to" is not the same as "payout of". The first suggests that you might win up to that amount, while the second gives a precise stat. If you win a big jackpot, you could have payouts up to 500% or more, but that doesn't mean the payout percentage is 500%. It's an attempt to deceive gamblers, which in itself is a red flag.
The payout you'll really play with is impossible to tell since casinos have no obligations to share that information. You should only trust specific slot machine payouts such as "payout 97%" but they're rare.
See slots to avoid for more.
A Higher Payout
Using a slots club card is good for you and allows you to get a higher payout in theory. The payout on the slot machine stays the same but you'll get a certain percentage (0.5% is common) of bonus to your slots club account and therefore, in theory, you'll get a higher payout.
And remember: club members get comps.
In addition to being a slots club member, you can use online slots bonuses should you feel like playing at home. Always sign-up for whatever bonuses you can and get (again in theory) a higher payout.
You can often judge a slots' payout (compared to other slots in the casino) based on the appearance; in general, the better it looks, the lower the payout. Nicer-looking slot machines cost more to casinos and players are the ones who pay for it.
A slot machine myth says that the slots out in the open have a higher payout than the ones out of everyone's sight; according to the myth, this encourages casino visitors to play as they see others winning. According to numerous sources, this seems to be a false assumption.
However, casinos sometimes place popular slots out in the open so that those walk in can see loads of other people playing and having fun (heard this from a slot manager).
Another popular myth says that casinos will switch slot payouts depending on the time of the day or day of the week. This is false according to numerous slot managers. Changing a slots' payout often includes paperwork and you have to get someone to change the EPROM chip inside the machine (unless the casino uses server-based slots, which are currently being tested at several casinos).
By the way, casinos aren't allowed to change a slot machine's payout percentage while someone's playing; in fact, in Nevada the machine has to be idle four minutes before and after the change.
How Much You Will Lose
Regardless of the bonuses or comps you may receive, you'll lose at slots in the long run, and it's important to learn how to calculate probable losses.
First of all, if you think you're playing a slot machine with a 95% payout, and you take $500 along with you, you're mistaken if you think you only stand to lose $25; the amount you take with you is irrelevant, the amount you wager is what counts.
If you play $5 a spin for an hour, and say you 600 spins an hour, you've wagered $3,000. Instead of losing $25, you've actually gone through the $500 six times already, losing $150 on average. That's $150 in an hour.
Say you want to enjoy your night playing slots and only play 200 spins an hour, which is fairly slow. You have a $100 with you and you make $1 bets. The machine has 95% payout (which you almost never know for sure) so every bet you theoretically deposit $1 and get $0.95 back.
After 200 spins, you've wagered your bankroll a little more than twice and have $90 back (after the first 100 spins, you should have $95 back; after the next 95 spins, you should have $90.25 back; after five more spins you should have $90). In other words, on average, you'll have lost 10% of $100 after playing slots slowly for an hour.
Here's the calculation: (wager)*(payout %)-(wager) = (loss).
In the example above: $200*0.95-$200 = -$10.
Also see online slot payouts.
Back to Slots Terminology.