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Best of Alan Krigman
Slot Club Cashback May Be More than Just Icing on the Cake26 July 2006
The cards do have a downside. They let the bosses amass detailed data on their patrons. But they're also keys to the world of goodies given away by casinos as marketing incentives. Everything from free tickets for entertainment events and coupons for meals at the all-you-can-eat buffet, to "cashback" -- normally in the form of credit bettors can load into the machines but convertible to coin of the realm at the push of a button. For folks with will power, anyway. And most people are used to having their spending tracked through credit, debit, and loyalty cards, so they accept the certain loss of privacy for the possibility of rewards.
The true value of a cashback program isn't always apparent. Casinos obfuscate
the numbers, trying to make their deals sound better than the next joint's.
For instance, they usually tout dollars returned for "points" earned
rather than for the total gambled. This makes it confusing to compare offers
such as $1 or $5 back for such-and-such a number of points. Still, anyone deciding
where to play based primarily on cashback should read the fine print and calculate
the rebate rate per dollar bet.
If you think half a percent back sounds like peanuts, think again. It's fairly generous for a slot inducement. And with the 3X and 5X deals now being advertised, the hauls can be hefty.
An approximate way to evaluate the worth of cashback is simply to add the rate to the return percentage on the machines. Say your favorite casino has an average return on multi-line multi-coin quarter slots of 95 percent. Cashback at the half percent level brings this to nearly 95.5 percent. With a 5X multiplier, the cashback comes to 2.5 percent and you're close to 97.5 percent overall. If you know how to spot a video poker game with an inherent 97.5 percent return, 5X on a nominal half percent cashback just about nulls the house advantage entirely.
Another way to think about cashback is the fraction of your gambling budget you expect to be refunded. Make believe you start a visit with a $200 bankroll and play for an extended period on a device which has 95 percent payback. Anything can happen in a particular game. Statistically, though, were you to recycle all your winnings, you'd run $3,800 through the machine.
If the casino has half a percent cashback, $3,800 in action will return you $19. This is only 0.5 percent of your theoretical $3,800 handle, but it's 9.5 percent of your $200 bankroll. In a 3X cashback promotion, you'd be awarded $57 -- 28.5 percent of what you brought in your fanny pack. And at 5X, the average would be $95 -- back a substantial 47.5 percent of your stake.
How do the same programs work if you're on a 97.5 percent game? On the average, with full recycling, you could expect to bet a total of $7,800 on a $200 bankroll. At half a percent cashback, that's a $39 refund -- close to 20 percent of your stake. At 3X, you'd earn $118 -- almost 60 percent of your poke. And a 5X bonus would amount to just about your entire gambling budget.
How can casinos afford to make offers that lose them money on every player? Do they hope to make it up in volume? On one hand, total recycling is a limit; actual handles are less. But there's a secret the bosses don't want anybody to know: they can't or won't do their arithmetic any better than the solid citizens. Or, as the muse of math mavens, Sumner A Ingmark, memorably muttered:
To judge economic soundness, you can use this simple gauge,
Best of Alan Krigman