In finance, a **basis point** is one one-hundredth of a percent. For example, a 150 basis point rise in interest rates is the same as a 1.5% rise. A 10 basis point fee is the same as a 0.1% fee. It would be understood from context whether this were a one-time fee or an annual fee.

When a change in interest rates is quoted in basis points, it is always understood this indicates an absolute change in the rate. This avoids the ambiguity that can arise when changes in interest rates are quoted as percentages. To illustrate, if an interest rate were 5%, and we were told the rate rose 2%, it would not be clear whether the change were absolute, rendering a new interest rate of

5% + 2% = 7%

[1]

or relative, rendering a new interest rate of

5%(1 + .02) = 5.1%

[2]

If instead we were told the rate rose 200 basis points, we would know the change was absolute and that the new interest rate must be 7%.