A basis point, or bp, denotes a change in hundredths of a percent.
- 1 basis point = 0.01%
- 100 basis points = 1%
Basis points are commonly used in banking and credit situations. For example, when the Federal Reserve cuts rates from 2.25% to 2.00%, it's referred to as 25 basis point cut. Or when a company's gross margin goes from 40.02% to 40.08%, it's referred to as a 6 basis point increase.