How to use this calculator
Choose your conversion mode: enter basis points to see the equivalent percentage, or enter a percentage to see basis points. Add a principal amount to see the annual dollar impact of that rate.
Use the rate comparison fields to find the basis point difference between two rates. This is useful when comparing loan offers, evaluating Fed rate changes, or analyzing investment fee differences.
Understanding basis points
A basis point is one hundredth of one percentage point (0.01%). Financial professionals use basis points to avoid ambiguity when discussing rate changes. Saying a rate rose “50 basis points” is clearer than saying it rose “half a percent” because the latter could be interpreted as a relative or absolute change.
Basis points are commonly used for interest rates, bond yields, mutual fund expense ratios, and credit spreads. Even small differences in basis points can translate to significant dollar amounts on large balances over time.
Frequently asked questions
What is a basis point?
A basis point equals 0.01%, or one hundredth of a percentage point. It is the standard unit for expressing small changes in interest rates, yields, and fees in the financial industry.
How do you convert basis points to a percentage?
Divide basis points by 100. For example, 75 basis points divided by 100 equals 0.75%. To go the other way, multiply the percentage by 100 to get basis points.
Why use basis points instead of percentages?
Basis points eliminate ambiguity. If a 5% rate increases by “5%,” does that mean it goes to 5.25% (relative) or 10% (absolute)? Saying it rose 25 basis points makes the absolute change perfectly clear.
How much is 100 basis points?
100 basis points equals exactly 1 percentage point. A rate moving from 4% to 5% is a 100 basis point increase. On $100,000, that means $1,000 more per year in interest.
How do basis points affect my mortgage?
On a $300,000 mortgage, every 25 basis points changes your annual interest by roughly $750. Over a 30 year term, that 0.25% difference can add up to $13,000 or more in total interest paid.