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Chip 3% App

edited 11 July 2018 at 11:55AM in Savings & Investments
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  • ValiantSonValiantSon
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    Aj23 wrote: »
    It still works in a similar principle to how a regular saver works though, as you conclude. Someone earlier said to use the regular saver calculator to work out the interest. So I'm not wrong like ValiantSon is saying. But thanks for you helpful comments.

    Yes you are!

    Interest on regular savers is not calculated on the average balance, but is rather calculated on the money in the account each day: the two are not the same!
  • karlie88karlie88 Forumite
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    Aj23 wrote: »
    you and Karlie got involved with your unwanted and unhelpful comments.

    We're not the only ones though, are we?

    Post #94 onwards: https://forums.moneysavingexpert.com/showthread.php?t=5783648&page=5

    Post #37 onwards: https://forums.moneysavingexpert.com/showthread.php?t=5859048&page=2

    And more MSE users...

    Let's not forget the time you called people who check their mobile banking apps on a daily basis 'ridiculous' and 'pathetic' on this thread.

    I note that the comment has subsequently been deleted (either by you or the forum team). I guess your comment was 'unwanted and unhelpful'. Pot kettle comes to mind....
    :grouphug: :D Official MSE canny forumite and HUKD VIP badge member :D :grouphug:
  • ValiantSonValiantSon
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    karlie88 wrote: »
    We're not the only ones though, are we?

    Post #94 onwards: https://forums.moneysavingexpert.com/showthread.php?t=5783648&page=5

    Post #37 onwards: https://forums.moneysavingexpert.com/showthread.php?t=5859048&page=2

    And more MSE users...

    Let's not forget the time you called people who check their mobile banking apps on a daily basis 'ridiculous' and 'pathetic' on this thread.

    I note that the comment has subsequently been deleted (either by you or the forum team). I guess your comment was 'unwanted and unhelpful'. Pot kettle comes to mind....

    And there are lots more examples to add to that. I started compiling a list and then thought better of it. Anyone who is interested can simply search their post history.
  • edited 16 July 2018 at 4:12PM
    burnoutbabeburnoutbabe Forumite
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    edited 16 July 2018 at 4:12PM
    I used chip for a while and then when its link with barclays online banking stopped working (and refused to accept the details again) I said i'd best close it.
    And now realise i have no details of what interest was earned in that time, as they don't issue any statements and the app is now inactive.

    So that is a bit frustrating, I'm having to chase them to tell me what interest, if any, was earned in the 6 months i had it open.

    NB: in fact if you close your account you lose any interest accrued but not yet paid.
  • bowlhead99bowlhead99 Forumite
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    ValiantSon wrote: »
    Yes you are!

    Interest on regular savers is not calculated on the average balance, but is rather calculated on the money in the account each day: the two are not the same!
    But the average amount of money in the account over an interest period is calculated by reference to your data, which is, the money in the account each day. So if you know the weighted average balance that will be in the account, and the annual interest rate applied to such amounts, you can multiply them out and see how much you'll get.

    For a given interest calculation period, you are saying that they look at the balance at the end of each day and calculate interest on it and then add up the chunks of interest to get the total interest to pay. I wouldn't disagree with that, as it's a practical way to do it and banks need to know their daily exposure. But it's effectively the same number as you would get by looking, after the fact, at the average balance held for the relevant interest calculation period, and multiplying that average balance for the period by the rate for the period to get the amount which should be accrued.

    It's true that the MSE method is just a simplistic shortcut. If the method of calculation were to look at a more complex set of circumstances it could still work to the nearest few pence; you just have to perform the "average" calculation at a nice granular level of detail to be able to feed it the inputs.

    For example, they have Mr Matt Mattics where his "average balance was roughly half the £3,000, in other words £1,500... so Matt should expect to earn around 10% of £1,500"...

    Instead, they could have an example customer Mr Arif Metic where his average balance was , not roughly but actually £1620 for the one year period. And so Arif with his 10% per year interest rate should expect to earn £162 for the one year interest period. It's convenient for people using averages when the interest periods are a year long and pay interest all at the end - as they are with popular regular savers such as Nationwide's - as it means you don't have to worry about doing twelve separate interest periods and feeding the received monthly interest into your weighted average balance calculation.

    The reason the MSE simplified example is not accurate is because the average balance fed into it for the interest period is not accurate. If you improve the accuracy of the data fed into it, you improve the quality of the output so that you don't need to calculate 365 interest components and add them up to find a 'better' number.

    You mentioned in an earlier post:
    The MSE guide is intended to show, in simple terms, what is going on, but in reducing it to simple terms, it also becomes a little misleading. Interest is not paid on the average balance
    . Of course, it's a simplification to show the basic effect (and explain the reason why you don't get paid on the full £3k if your average deposited with the bank was some lower number).

    Of course, if your average balance of £1500 is only a guesstimate, the answer is only going to be in the same ballpark but not very accurate. If you replace £1500 with an actual observed and calculated average, it's probably close enough - not so far off as to say that using an average method is going to get you a poor and inaccurate result.
  • ValiantSonValiantSon
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    bowlhead99 wrote: »
    But the average amount of money in the account over an interest period is calculated by reference to your data, which is, the money in the account each day. So if you know the weighted average balance that will be in the account, and the annual interest rate applied to such amounts, you can multiply them out and see how much you'll get.

    For a given interest calculation period, you are saying that they look at the balance at the end of each day and calculate interest on it and then add up the chunks of interest to get the total interest to pay. I wouldn't disagree with that, as it's a practical way to do it and banks need to know their daily exposure. But it's effectively the same number as you would get by looking, after the fact, at the average balance held for the relevant interest calculation period, and multiplying that average balance for the period by the rate for the period to get the amount which should be accrued.

    It's true that the MSE method is just a simplistic shortcut. If the method of calculation were to look at a more complex set of circumstances it could still work to the nearest few pence; you just have to perform the "average" calculation at a nice granular level of detail to be able to feed it the inputs.

    For example, they have Mr Matt Mattics where his "average balance was roughly half the £3,000, in other words £1,500... so Matt should expect to earn around 10% of £1,500"...

    Instead, they could have an example customer Mr Arif Metic where his average balance was , not roughly but actually £1620 for the one year period. And so Arif with his 10% per year interest rate should expect to earn £162 for the one year interest period. It's convenient for people using averages when the interest periods are a year long and pay interest all at the end - as they are with popular regular savers such as Nationwide's - as it means you don't have to worry about doing twelve separate interest periods and feeding the received monthly interest into your weighted average balance calculation.

    The reason the MSE simplified example is not accurate is because the average balance fed into it for the interest period is not accurate. If you improve the accuracy of the data fed into it, you improve the quality of the output so that you don't need to calculate 365 interest components and add them up to find a 'better' number.

    You mentioned in an earlier post: . Of course, it's a simplification to show the basic effect (and explain the reason why you don't get paid on the full £3k if your average deposited with the bank was some lower number).

    Of course, if your average balance of £1500 is only a guesstimate, the answer is only going to be in the same ballpark but not very accurate. If you replace £1500 with an actual observed and calculated average, it's probably close enough - not so far off as to say that using an average method is going to get you a poor and inaccurate result.

    So, essentially, you are saying that I am correct. We didn't need the verbose post for you to say that.

    I understand the mathematics behind the calculations, but as represented by MSE - and aj23 - the method used produces an inaccurate result. MSE do actually have a calculator, which produces an accurate result, but their guide oversimplifies it. The result of this oversimplification is that people end up not understanding, and latching on to half truths.
  • edited 16 July 2018 at 4:47PM
    bowlhead99bowlhead99 Forumite
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    edited 16 July 2018 at 4:47PM
    ValiantSon wrote: »
    So, essentially, you are saying that I am correct. We didn't need the verbose post for you to say that.

    I understand the mathematics behind the calculations, but as represented by MSE - and aj23 - the method used produces an inaccurate result. MSE do actually have a calculator, which produces an accurate result, but their guide oversimplifies it. The result of this oversimplification is that people end up not understanding, and latching on to half truths.

    You had mentioned earlier that:
    The MSE guide is intended to show, in simple terms, what is going on, but in reducing it to simple terms, it also becomes a little misleading. Interest is not paid on the average balance!
    The first sentence I agree with.

    The second - that interest is not paid on the average balance - does not sit easily with me as it can be proven that if you are accurate with the determination of the"average balance" and then multiply it by the interest rate for the period you will get exactly the same result as if you do tens or hundreds of daily calculations based on a daily rate and then add them up.

    The MSE example is deliberately lazy and inaccurate in saying the person's average balance was 'roughly' £x for simplicity, but its inaccuracy is a fault of using a "roughly half" figure as the average, not a problem in using an average balance per se. Using an accurate average would get you an accurate output.

    Aj23 suggested:
    You are always looking for a reason to argue, you just can't help yourself
    which amused me a little because I have seen you in action on other threads. :)

    One of your responses to that post of his was "nobody in this thread disagrees with what I wrote". I do agree with you saying that interest is calculated on a daily basis based on what's in the account. However, I disagree with your soundbite that "Interest is not paid on the average balance!". The functional effect of calculating interest on individual daily balances from day to day and adding them up at the end of the interest period, is that you end up with a calculation that overall, reflects interest being paid on some average of the daily balances. So, as a dissenter I felt it was worth pointing out.

    Apologies if you don't like the verbosity, it probably didn't take all the words in my post above to make you realise that what you had said was an oversimplification and capable, on a standalone basis, of being disagreed with. But if I had said something shorter and not explained where I was coming from, you would probably argue with it, as is your wont. :D
  • ValiantSonValiantSon
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    bowlhead99 wrote: »
    You had mentioned earlier that:
    The first sentence I agree with.

    The second - that interest is not paid on the average balance - does not sit easily with me as it can be proven that if you are accurate with the determination of the"average balance" and then multiply it by the interest rate for the period you will get exactly the same result as if you do tens or hundreds of daily calculations based on a daily rate and then add them up.

    Sorry, but that doesn't actually mean that interest is paid on the average balance. Just because you can create a formula for it, that doesn't mean that is how it is calculated - and indeed it isn't how it is calculated!
    bowlhead99 wrote: »
    The MSE example is deliberately lazy and inaccurate in saying the person's average balance was 'roughly' £x for simplicity, but its inaccuracy is a fault of using a "roughly half" figure as the average, not a problem in using an average balance per se. Using an accurate average would get you an accurate output.

    I fear that you are missing the point. The MSE guide is written to explain why people shouldn't be surprised at their returns, but it oversimplifies things to a point that it becomes misleading. I'm not arguing that you cannot do a retrospective calculation of interest based on the actual average balnce, but the MSE guide misleads people into thinking that the average is half of what they have deposited into the account. This is my problem with the explanation, and also why it is not actually helpful to talk about average balances, because that is not how the interest is calculated.
    bowlhead99 wrote: »
    Aj23 suggested: which amused me a little because I have seen you in action on other threads. :)

    Oh, the irony!

    aj23 doesn't like that I have corrected him previously on his inaccurate and sometimes wildly misleading comments. That is his problem, not mine.

    If I disagree with something then I am entitled to argue my case, and if I see an error in something then I am equally entitled to point it out.
    bowlhead99 wrote: »
    One of your responses to that post of his was "nobody in this thread disagrees with what I wrote". I do agree with you saying that interest is calculated on a daily basis based on what's in the account. However, I disagree with your soundbite that "Interest is not paid on the average balance!".

    At the time that I wrote that, nobody had disagreed with what I had written. Funnily enough, I don't have magical powrs to know that you would pop up four days later to try and argue with me about something completely irrelevant. The fact that you can create an equation to create to correctly calculate on the average balance, doesn't mean that is how it is done.

    I fear that you are trying to argue an irrelevancy for the sake of putting me in my place. It isn't the first time that you have behaved in this way, with either me, or with others.
    bowlhead99 wrote: »
    The functional effect of calculating interest on individual daily balances from day to day and adding them up at the end of the interest period, is that you end up with a calculation that overall, reflects interest being paid on some average of the daily balances. So, as a dissenter I felt it was worth pointing out.

    You tried to argue that something was possible, rather than it was what was actually done. What is actually done is what I said, so your comment was pointless, other than to try and score points over me.
    bowlhead99 wrote: »
    Apologies if you don't like the verbosity, it probably didn't take all the words in my post above to make you realise that what you had said was an oversimplification and capable, on a standalone basis, of being disagreed with. But if I had said something shorter and not explained where I was coming from, you would probably argue with it, as is your wont. :D

    Once again, I have to say, oh, the irony!
  • edited 16 July 2018 at 7:18PM
    bowlhead99bowlhead99 Forumite
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    edited 16 July 2018 at 7:18PM
    ValiantSon wrote: »
    Funnily enough, I don't have magical powrs to know that you would pop up four days later to try and argue with me about something completely irrelevant.
    I hadn't noticed that your posts were last week's, I just opened a thread that was updated earlier today, and noticed that the last half of it seemed to be mostly you putting someone in their place ending with you banging your head against the wall saying you give up because they never listen, and then just in case they were still listening, doing another three posts to "argue with a brick wall" further, or perhaps to belittle them a bit more for good measure :)
    The fact that you can create an equation to create to correctly calculate on the average balance, doesn't mean that is how it is done.
    It's certainly an efficient way of getting it done, and speaking from experience it's how accountants might calculate an interest receivable or payable when the person receiving it doesn't really need to know the exact daily accrual at a point on time (such as in an account where the interest isn't added to capital until the end of the period, as in a popular range of regular savings accounts), and/or the capital isn't being withdrawn before the interest period is up - as we are describing here..

    In your opening post on this thread, OP had ended his post with, "Too good to be true? Or does it work like a regular saver in which you get 3% on the average balance?"
    You could have been kind and said "yes, sorry buddy the other way you were looking at it is too good to be true. You're right that you'll effectively get paid on the average balance you've had in there over the period, not an entire year's interest on the amount you have built up to at some snapshot date."

    That would be the way to do it without trying to get argumentative.

    But what you said was:
    Regular savers don't pay interest on the average balance. They pay whatever the rate is on all the money in the account, calculated daily. This is not the average balance...
    When you look at how much you receive in a regular saver account, it is the same as receiving the interest rate for the time period on the average balance for the time period. So it's confusing to tell someone that regular savers *don't* pay interest on the average balance held in them.

    And to say that "all the money in the account, calculated daily... this is not the average balance" is likewise confusing because what is the average balance for a period, if not the average of each day's closing balance, daily?

    Once again, I have to say, oh, the irony!

    I expect to outsiders we each just come off as idiots who like to read our own words in print more than we like to keep our dignity. :D
  • ValiantSonValiantSon
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    bowlhead99 wrote: »
    I hadn't noticed that your posts were last week's, I just opened a thread that was updated earlier today, and noticed that the last half of it seemed to be mostly you putting someone in their place ending with you banging your head against the wall saying you give up because they never listen, and then just in case they were still listening, doing another three posts to "argue with a brick wall" further, or perhaps to belittle them a bit more for good measure :)

    It's certainly an efficient way of getting it done, and speaking from experience it's how accountants might calculate an interest receivable or payable when the person receiving it doesn't really need to know the exact daily accrual at a point on time (such as in an account where the interest isn't added to capital until the end of the period, as in a popular range of regular savings accounts), and/or the capital isn't being withdrawn before the interest period is up - as we are describing here..

    In your opening post on this thread, OP had ended his post with, "Too good to be true? Or does it work like a regular saver in which you get 3% on the average balance?"
    You could have been kind and said "yes, sorry buddy the other way you were looking at it is too good to be true. You're right that you'll effectively get paid on the average balance you've had in there over the period, not an entire year's interest on the amount you have built up to at some snapshot date."

    That would be the way to do it without trying to get argumentative.

    But what you said was:
    When you look at how much you receive in a regular saver account, it is the same as receiving the interest rate for the time period on the average balance for the time period. So it's confusing to tell someone that regular savers *don't* pay interest on the average balance held in them.

    And to say that "all the money in the account, calculated daily... this is not the average balance" is likewise confusing because what is the average balance for a period, if not the average of each day's closing balance, daily?



    I expect to outsiders we each just come off as idiots who like to read our own words in print more than we like to keep our dignity. :D

    Okay, I'm out. You continue to use this thread as an attempt to attack me personally.
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