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The Smart Mathematics of Credit Cards

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Photo: Andres Rueda

You most likely use credit cards daily, but have you taken the time to consider how they work? Let’s examine one of the most obvious aspects of the credit card: the number. Credit card numbers are 14 to 16 digits long and link your purchase back to your account at the bank. But what do they mean?

The first digit is reserved for specifying what type of card it is. 3 = Travel and Entertainment card (34/37 = AMEX, 38 = Diner’s Club), 4 = Visa, 5 = MasterCard, and 6 = Discover. Each type handles the next 12 to 14 digits differently. They are used to identify the account number, bank number, whether it is a business or personal account, and/or the currency. Check out these sites for a more in depth coverage of how each credit card provider uses these digits.

One thing all credit cards have in common is a check digit at the end which is used to verify that it is a valid credit card. The check digit uses the Luhn algorithm, also known as the modulus 10 algorithm, to “check” the rest of the numbers. It’s goal is to not prevent counterfeit, but rather to protect against the accidental mistyping or mistransmission of the number.

The algorithm:

  1. Double the value of every second digit moving from right to left.
  2. Sum the value of every individual digit.
  3. If the total ends in zero it is valid, any other number it is invalid.

Let’s take a simple example: 47142

  1. 2×4 = 8, 2×7 = 14. Therefore we have 4(14)1(8)2
  2. 4+1+4+1+8+2 = 20
  3. 20 ends in zero so the number is valid.

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How Would You Like Continuous Direct Deposit for Your Paycheck?

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Photo: Andrew Magill

I receive a monthly paycheck. No I’m not bragging, quite the opposite, I am complaining. This sounds great to those who are unemployed, but why do I have to wait an entire month before being payed? The work that I do on March 1st I will not actually receive any compensation for until April 1st, 31 days later. To put it another way, 0.1% of my life later. Now does it seem like a bigger deal? I would much rather have the instant gratification of immediately receiving the wages of my hard day’s work.

Before big corporations came about I imagine everyone got paid at the end of the day. Today we sign agreements to give the company the right to only pay us once a week, bi-weekly, or even monthly regardless of whether you are paid by the hour or on salary. And of course there is no interest paid even though they are holding what is rightfully your money. My solution I call continuous direct deposit.

In the workplace money is never physically handed to the employee by their boss, it is all done by either check or direct deposit. Direct deposit allows for the transferring of funds from one bank account to another without dealing with cash or checks. Continuous direct deposit would transfer money from the employer’s bank account to the employee’s at infinitesimally short time periods — time periods that would make my monthly paycheck look like an eternity. Anyone with a salaried position can determine how much money they make any given minute, second, or even millisecond. This can be boiled down into an equation to be used to continuously deposit your paycheck into your account.

In theory you should be able to head to your bank’s website, repetitiously hit refresh, and watch you balance slowly tick up. Altering the equation could ensure that money is only deposited weekdays or during work hours.

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