In this Casinoplusbonus news article we look into why cashback is so popular and break down the maths behind this online casino bonus. (Photo by Vaskar Sam on Unsplash)
There are quite a few casino players who say cashback bonuses are better than deposit match and free spins promotions at online casinos.
Here’s are some of the reasons why they say this:
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- Lower wagering requirements
- Cashback lowers the house edge of the game
- Keeps you playing longer after a bad run on the slots or tables
- Available at cryptocurrency and fiat currency casinos
- Applied to online slots or live casino games
- There are also sports betting cashback deals
How does cashback work?
Cashback gives you a percentage of any losses from your previous deposit or qualifying deposits as bonus money. For example, a casino may offer a 20% weekly cashback of up to 200 Euros.
Let’s say you deposited 100 Euros for the week, and by the end, you lost 80 Euros. The cashback is 20% of that 80 Euros, which is 16 Euros.
Now, with a 100 Euro budget, we are looking at a low-stakes player who probably bets around 20p a round playing roulette or slots. A player who plays higher stakes to maximise the 200 Euros limit, in my example above, would have lost 1,000 Euros.
Unfortunately, cashback does mean you will need to lose to earn a bonus balance. However, we all have a cold streak at some point, so think of it as insurance against your losses.
On the positive side, the bonus money usually comes with a low wagering requirement, while some casinos have 0x wagering.
How does cashback lower the house edge of a casino game?
It only takes a straightforward explanation to explain why cashback deals give you an advantage over the house. If you get 10% or 20% back from your losses, you close the gap on a cold streak.
As mentioned, we all have cold streaks when we play casino games, which means we have a run of dud spins or bad cards. This is part of playing casino games, as the house edge is not in your favour because, by design, casino games weigh in favour of the house, or casinos would not exist.
That means a slot with a 96% return to player (RTP) has a house edge of 4%. Thus, the house will earn 4% profit from this game in the long run, which means 4% of your bets, too.
Now, why do I say it in the long run? Well, first, you need to understand how variation works before you can understand how it can lower the house edge of a casino game.
Examples of Variation
In the long run, you may hit a winning streak on a 96% RTP slot and earn an RTP of 150%. However, after that winning streak, you will likely experience a losing streak at some point and slowly, that 150% will edge back towards 96% until it evens out.
The swing can also happen in the opposite direction. You could end up with a 50% RTP, but then suddenly, later down the line, you hit a winning streak and edge close to 96%.
We call these swings variation in probability or RTP.
Lowering the House Edge
Now, here is why I like cashback bonuses so much.
When you lose over one week and receive 20% back on your losses from a cashback, you would have lost that money anyway at some point because of variation and losing streaks. You have earned 20% of those losses back, which slightly reduces the house edge, especially since the cashback has 0x or 1x wagering requirements.
What is the mathematics behind reducing the house edge?
Here is where things get technical, but, if you stick with me, I believe I can explain this concept quite well.
Let’s go back to the 96% RTP slot example and the variation example where I mentioned cold and winning streaks. Remember I said that by design, a 96% RTP casino game should take 4% profit for you in the long run?
Out of the 4% you lose playing that slot, if you are using a 20% weekly cashback deal, then in the long run, the cashback will be 20% of that 4% loss. Are you still with me?
Let me explain further by oversimplifying the maths.
Sticking our 100 Euro per week budget, if you bet 52 x 100 Euros in a year, that’s 5,200 Euros worth of bets. If you lose that 4%, then you have lost 208 Euros.
Of that 208 Euros, your cashback will earn you back 20% of your losses in cashback money, which from 208 Euros is 41.60 Euros. Now, to calculate how much you have reduced the house edge by, you need to take that 41.60 Euros as a percentage of all your bets for the year, which we determined to be 5,200 Euros.
41.60 Euros as a percentage of 5,200 Euros is 0.8%. That means the 96% RTP with a 4% house edge is now only a 96.8% RTP, which is a 3.2% RTP.
Why are cashback wagering requirements so low?
I am unsure why online casinos have decided that cashback wagering requirements should be so low. Maybe it is simply to enhance how attractive they are to players, and in the long run, even a 20% cashback’s impact on the house edge is minimal, as per our 0.8% reduction example above.
Here are some online casinos with low wagering requirement cashback deals:
- 7Signs Live Casino: If you play live dealer games, you get a 25% weekly cashback on your losses with just 1x wagering applied.
- 7Signs Casino: An online slot cashback promo gives you 15% of your losses for the week back, and you claim up to 3,000 Euros.
- Playouwin Casino: This casino has a welcome bonus with 0x wagering applied to its cashback welcome bonus. It covers your first three deposits for the welcome bonus, and you could win back up to €1,500 / C$2,100 / NZ$2,400 / ₹120,000 back in cash because there are no wagering requirements.
To find these an overview of these two online casino, either head to our online casino reviews page or use the Casinoplusbonus search bar. Type in 7Signs casino review for 7Signs and Playouwin casino review for access to a full breakdown of the Playouwin online casino platform.
If you enjoyed reading this guide to cashback bonuses, please leave a comment. I’d also like to hear opinions on wagering requirements, and it would be even better if you could tell me about your experiences with cashback offers.
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