What Are Basis Points?

A clear, concise guide to basis points — what they are, how to convert them, and why they matter in finance.

Definition

A basis point (plural: basis points, abbreviation: bps, pronounced “bips”) is a unit of measurement equal to 1/100th of a percentage point, or 0.01%. It is the standard unit used in finance to describe interest rate changes, bond yield movements, and fund expense ratios.

Using basis points eliminates the ambiguity that can arise when discussing percentage changes. When someone says a rate “increased by 1%,” it could mean an absolute or relative change. Saying “increased by 100 basis points” is always clear.

Conversion Formula

Percent → Basis Points: bps = percent × 100

Basis Points → Percent: percent = bps ÷ 100

Basis Points → Decimal: decimal = bps ÷ 10,000

For example: 50 bps ÷ 100 = 0.50%, and 2.75% × 100 = 275 bps. Need to do a quick conversion? Use our calculator →

Common Conversions Table

Here are the most frequently referenced basis-point-to-percent conversions:

Conversion table showing basis points, percentages, and decimal equivalents
Percent (%)Basis Points (bps)Decimal
0.01%1 bps0.0001
0.05%5 bps0.0005
0.1%10 bps0.0010
0.25%25 bps0.0025
0.5%50 bps0.0050
0.75%75 bps0.0075
1%100 bps0.0100
1.5%150 bps0.0150
2%200 bps0.0200
2.5%250 bps0.0250
3%300 bps0.0300
5%500 bps0.0500
10%1000 bps0.1000

Frequently Asked Questions

What is a basis point?

A basis point (abbreviated bps, pronounced 'bips') is one hundredth of one percentage point. So 1 basis point = 0.01%. Basis points are commonly used in finance to describe small changes to interest rates, bond yields, and fund expense ratios.

How many basis points are in 1 percent?

There are exactly 100 basis points in 1 percent. To convert a percentage to basis points, multiply by 100. For example, 1% × 100 = 100 bps.

Is 0.50% equal to 50 basis points?

Yes. 0.50% multiplied by 100 equals 50 basis points. Conversely, 50 basis points divided by 100 equals 0.50%.

Why do finance professionals use basis points instead of percentages?

Basis points remove ambiguity. If someone says a rate 'increased by 1%,' it is unclear whether they mean an absolute increase of one percentage point (e.g., 5% to 6%) or a relative increase of 1% (e.g., 5% to 5.05%). Saying 'increased by 100 basis points' is unambiguous — it always means an absolute increase of 1 percentage point.

How do I convert basis points to a percentage?

Divide the number of basis points by 100. For example, 75 bps ÷ 100 = 0.75%. This works for any value: 250 bps = 2.50%, 12.5 bps = 0.125%.

How do I convert a percentage to basis points?

Multiply the percentage by 100. For example, 2.50% × 100 = 250 bps. It works for decimals too: 0.375% × 100 = 37.5 bps.

What does a 25 basis point rate hike mean?

A 25 basis point rate hike means the interest rate increased by 0.25 percentage points. For example, if the Federal Reserve raises the federal funds rate by 25 bps from 5.25%, the new rate becomes 5.50%.

How do basis points affect my mortgage?

Even small changes in basis points can significantly impact mortgage costs over time. On a $300,000 30-year mortgage, a 25 bps increase in the interest rate (e.g., from 6.50% to 6.75%) adds roughly $50 per month and about $18,000 in total interest over the life of the loan. Use our Loan Impact Calculator to see exact estimates.

What is a basis point in bonds?

In the bond market, basis points are used to express changes in yield. If a 10-year Treasury yield moves from 4.25% to 4.35%, that is a 10 basis point increase. Bond prices and yields move inversely, so a rise in yield (in bps) means a fall in bond price.

Can basis points be negative?

Basis points themselves are a unit of measurement, but they can represent a negative change. For example, a rate cut of 50 basis points means the rate decreased by 0.50 percentage points.

What is the difference between basis points and percentage points?

One percentage point equals 100 basis points. Basis points provide finer granularity. Saying '25 basis points' is the same as saying '0.25 percentage points' or 'one quarter of a percentage point.'

Are basis points used outside of finance?

While basis points are most common in finance (interest rates, bond yields, fund fees, credit spreads), they occasionally appear in other fields like statistics and tax policy whenever precision about small percentage changes is needed.

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