## Thursday, May 5, 2011

### Grand Complication Math, Part IV

This week I've been posting about Grand Complication Math problems - complex problems solved with lots of creatively-applied chunks of regular math.

I created this term based on Grand Complication Watches, which combine multiple functions in one small mechanism that you can wear on your wrist. Here's an Ulysse Nardin watch called the Ghengis Khan, with Westminster Chimes, minute repeater, tourbillon, and automatons (animated figures who fight when the chimes are activated).

What is our Grand Complication Problem today? Balancing a checking account.

That doesn't seem so hard, does it? Simple arithmetic. You subtract the outgoing checks from your balance, add the deposits as they occur, and voilĂˇ, it's done.

Right? Wrong. Those were the good old days.

Nowadays, if you use an electronic bill-paying service (essentially electronic personal checks):
• You might have some bills set up to be paid automatically when they come due. You can set up these payments (standing orders) for your house loan, credit card, mobile phone bill, utility bill and so on.
• Don't forget that your newspaper, magazine subscriptions, airline credit card, Amazon Prime, eBay or Skype bill might at any time be taking money from (direct debit) your account for past or future services.
NOTE: Standing orders are payments sent out by the payer (you) while direct debits are pulled from your account by the payee (them).
• You probably have Direct Deposits for paychecks, and automatic transfers to/from other bank accounts.
• Don't forget any monthly fees your bank might be charging you on a regular basis, and any one-time fees for bouncing a check, using overdraft protection, wiring funds or using ATM machines.
• Remember transfers to/from Paypal or other outside bill payment services.

These are all intangible, invisible, electronic services. You can also use a debit card at an ATM machine, a Point of Sale (POS) terminal, gas pump, cash register, etc. You can load money onto a cash card for another person to use.
• You might experience more exotic debits and credits, such as wire transfers (essentially electronic cashier's checks). These bank-to-bank exchanges are identified by routing codes (Fedwire, BIC, IBAN, SWIFT, etc) and can take some time to process. They invariably involve fees applied on each end and/or in the middle.
NOTE: Wire transfers result in unpredictable amounts arriving in your account. You ask a friend to wire \$1000. She sends \$1000 plus pays a wire fee of \$25. You get \$982.17 due to handling fees applied by banks along the way, then are charged \$10 to receive the money! Your deposit is \$972.17, not \$1000. Her debit is \$1025, not \$1000. The banks get \$52.83.
• You may run into Regulation D, which limits you to 6 electronic transfers a month from savings or Money Market accounts (pre-authorized, automatic, or bill-pay transfers, including ACH; overdraft protection; transfers to other accounts or payable to a third party by messenger, telephone, fax, or home banking). Requests arriving after the limit is reached will not be allowed and will incur penalties. The "counting" occurs when your request is received, not when you make it, so some transfers may surprise you by falling into the wrong month. You can avoid limits if you bank in person, mail your  request or use an ATM but ATMs are not real time transfers, and may take 2 days to process.
Is that enough? Have I finished my list? No.
• Beginning in July 2011, banks will be able to pay interest on checking accounts (not yet allowed in the USA) so we might have some more complications ahead of us.
Have I convinced you yet that balancing a checking account is a Grand Complication Problem?

Many people just continually check their balances to avoid overdrafts, and never verify all the transactions.