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What Are Basis Points? Definition, How to Use and How to Calculate
A basis point or bp is equivalent to 1/100 of a percent. Use it when you want to be precise in communicating changes in percentages.
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A basis point is one hundredth of a percent, so 100 basis points is equivalent to 1%. “Basis point” is sometimes abbreviated to “bp” and “basis points” to “bps.”
When are basis points used?
Basis points are often used to measure a difference in percentages. You’ll often find them in news coverage or conversations around financial topics, such as changes in interest rates, and political polls and in scientific data.
That’s because they are helpful in calculating and communicating precise figures. Measuring with basis points helps prevent ambiguity and inaccuracy.
For example, if you’re discussing an interest rate that is currently 5%, and you say it’s expected to increase 10% next month, that increase could be interpreted differently.
Someone could interpret the new rate to be 15% (if they simply added the two figures together: 5% + 10% = 15%). Someone else could interpret the new rate to be 5.5% (if they took 10% of 5% and added that number to the current rate of 5%). But, if you say instead that the 5% interest rate is expected to increase 1,000 basis points, then it’s clear you mean that the new rate will be 15% (since 1,000 basis points = 10%).
In the world of personal finance, you may hear basis points mentioned in relation to:
4.20%SoFi members with direct deposit can earn up to 4.20% annual percentage yield (APY) on savings balances (including Vaults) and 1.20% APY on checking balances. There is no minimum direct deposit amount required to qualify for the 4.20% APY for savings. Members without direct deposit will earn 1.20% APY on all account balances in checking and savings (including Vaults). Interest rates are variable and subject to change at any time. These rates are current as of 04/24/2023. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet
4.75%Annual Percentage Yield (APY) is accurate as of 05/09/2023. APY is variable and subject to change at any time without notice. No monthly service charge. No minimum balance requirement. Must fund with 15 days of opening account.
These cash accounts combine services and features similar to checking, savings and/or investment accounts in one product. Cash management accounts are typically offered by non-bank financial institutions.
These cash accounts combine services and features similar to checking, savings and/or investment accounts in one product. Cash management accounts are typically offered by non-bank financial institutions.
4.50%Annual percentage yield (variable) is as of 5/8/23. 5.00% APY with a $75K deposit or 4.75% APY with a $25K deposit. New customers only with qualifying deposit. Terms apply.
Min. balance for APY
$0
CDs (certificates of deposit) are a type of savings account with a fixed rate and term, and usually have higher interest rates than regular savings accounts.
CDs (certificates of deposit) are a type of savings account with a fixed rate and term, and usually have higher interest rates than regular savings accounts.
3.30%Your annual percentage yield can be as high as 3.30% based on the following combined rate rewards: direct deposits (not including intra-bank transfers from another account) totaling $1,500 or more each month will earn 0.40%. A qualifying direct deposit is required for the remaining interest rate qualifications to apply. Ten (10) point-of-sale transactions per month using your Rewards Checking Visa® Debit Card for normal everyday purchases with a minimum of $3 per transaction, or enrolling in Account Aggregation/Personal Finance Manager (PFM) will earn 0.30%; maintaining an average daily balance of at least $2,500 per month in an Axos Self Directed Trading Invest account will earn 1.00%; maintaining an average daily balance of at least $2,500 a month in an Axos Managed Portfolio Invest account will earn 1.00%; and making a monthly payment to an open Axos Bank consumer loan (commercial and business loans excluded) via transfer from your Rewards Checking account will earn a maximum of 0.60%.
Monthly fee
$0
Money market accounts pay rates similar to savings accounts and have some checking features.
Money market accounts pay rates similar to savings accounts and have some checking features.