A basis point is one hundredth of a percentage point, or 0.01%. So 100 basis points make 1%. On a $300,000 loan, 25 basis points come to $750 a year.
Finance uses the unit because "1%" gets ambiguous when the thing changing is already a percentage. Here's how to convert, and what a few basis points do to loans, bonds and fees.
Percent or percentage point? Basis points settle it
Say a rate rises from 4.00% to 4.50%. That's up 50 basis points, or half a percentage point. In relative terms, though, it's up 12.5%, since 0.5 ÷ 4 = 0.125.
Both statements are true, and "the rate rose 12.5%" misleads anyone who hears percentage points. Quoting basis points leaves only one reading. These are the sizes you'll meet most:
| Also called | Basis points | Percent | On $10,000 |
|---|---|---|---|
| One basis point | 1 | 0.01% | $1.00 |
| A quarter point | 25 | 0.25% | $25.00 |
| Half a point | 50 | 0.50% | $50.00 |
| A full point | 100 | 1.00% | $100.00 |
What the dollar figure covers
The calculator applies the basis points once. When they describe a yearly rate, like a loan rate or fund fee, you get dollars per year.
A 1% advisory fee on a $250,000 portfolio is 100 basis points, or $2,500 a year. The calculator doesn't compound anything, and it doesn't follow a loan balance down. Both change the long-run picture, as the next sections show.
A quarter point on a $300,000 mortgage
Here's a 30-year, $300,000 fixed-rate mortgage at four rates, each step measured in basis points:
| Step | Rate | Monthly payment | Total interest |
|---|---|---|---|
| Starting rate | 6.00% | $1,799 | $347,515 |
| Up 25 basis points | 6.25% | $1,847 | $364,975 |
| Up 50 basis points | 6.50% | $1,896 | $382,633 |
| Up 100 basis points | 7.00% | $1,996 | $418,527 |
Each quarter point adds about $48 to $50 a month. The basis point calculator puts 25 basis points on $300,000 at $750 a year, or $62.50 a month. Your payment rises by less than that, but the loan pays down more slowly.
Over 30 years, that quarter point costs $17,460 in extra interest. Multiplying $750 by 30 gives $22,500, which overstates it, because the balance shrinks as you pay. The mortgage amortization calculator runs any rate you're quoted.
Basis points move bond prices
Bond yields are quoted in basis points too, and when yields rise, existing bonds fall in price. Here's a 10-year bond with a 4% coupon, paid twice a year, per $1,000 of face value:
| Market yield vs coupon | Yield | Bond price |
|---|---|---|
| 25 basis points below | 3.75% | $1,020.69 |
| Equal to the coupon | 4.00% | $1,000.00 |
| 25 basis points above | 4.25% | $979.81 |
| 50 basis points above | 4.50% | $960.09 |
| 100 basis points above | 5.00% | $922.05 |
Near par, each basis point is worth about 80 cents per $1,000 bond. A rise of 25 basis points costs $20.19. Prices also gain slightly more when yields fall than they lose when yields rise. The bond price calculator handles other coupons and maturities.
Fifty basis points of fees over 25 years
Fees are where small numbers get expensive. Here's $100,000 growing at 7% a year, and the same return minus 50 or 100 basis points:
What a yearly fee takes from $100,000
Value after each year at 7%, and at 7% minus 50 or 100 basis points
- 7% a year $542,743
- Minus 50 basis points $482,770
- Minus 100 basis points $429,187
Show the numbers
| Year | 7% a year | Minus 50 basis points | Minus 100 basis points |
|---|---|---|---|
| 1 | $107,000 | $106,500 | $106,000 |
| 5 | $140,255 | $137,009 | $133,823 |
| 10 | $196,715 | $187,714 | $179,085 |
| 15 | $275,903 | $257,184 | $239,656 |
| 20 | $386,968 | $352,365 | $320,714 |
| 25 | $542,743 | $482,770 | $429,187 |
This calculator shows only that first $500. After 25 years, 50 basis points have cost about $60,000, and 100 basis points about $114,000. The expense ratio calculator runs the same comparison for a fund's fee.
Reading a Fed statement in basis points
Fed statements give rate changes in fractions of a percentage point. On September 17, 2025, the Fed lowered its target range "by 1/4 percentage point" to 4 to 4-1/4 percent. That's a cut of 25 basis points.
The target is a range, not a single rate. On September 16, 2026, the Fed raised it by 1/4 percentage point, from 3.50–3.75% to 3.75–4.00%. The band itself is 25 basis points wide. Each new statement gives the current range.
Does your card or credit line follow an index that rose by those 25 basis points? Then each $10,000 you owe costs $25 a year more.