basis points vs percentage points

What Are Basis Points and Percentage Points?

Basis points and percentage points are two units used to describe changes in percentages. A percentage point measures the direct difference between two percentages; for example, an increase from 5% to 6% is a rise of 1 percentage point. A basis point is a finer unit—1 basis point equals 0.01%. Therefore, an increase of 100 basis points is equivalent to an increase of 1 percentage point.

You can think of them like the markings on a ruler: percentage points are like centimeters, while basis points are like millimeters. When expressing precise changes in rates, fees, or yields, basis points provide greater accuracy. For simple comparisons between two ratios, percentage points are more intuitive.

What Is the Difference Between Basis Points and Percentage Points?

The key difference lies in their meaning and precision. A percentage point refers to the absolute difference between two percentages. A basis point subdivides this scale into increments of 0.01%, making it ideal for expressing small adjustments with high accuracy.

For example, if an interest rate moves from 2% to 2.25%, that is an increase of 0.25 percentage points or 25 basis points. If you’re talking about “percentage change,” that’s the relative change compared to the original value: a 0.25% increase from 2% is a 12.5% percentage change—different from a percentage point.

How Do You Convert Between Basis Points and Percentage Points in Rates and Yields?

Remember these relationships: 1 percentage point = 1% = 100 basis points; 1 basis point = 0.01% = 0.0001 (in decimal form).

Step 1: Determine whether you’re dealing with the difference between two percentages (use percentage points) or a fine adjustment in a rate (use basis points).

Step 2: To convert a percentage difference to basis points, multiply the percentage by 100. For example, a difference of 0.25% equals 25 basis points.

Step 3: To convert basis points to a percentage, divide the number of basis points by 100. For instance, 20 basis points equals 0.20%.

Examples:

• If annual yield rises from 5% to 6%, the difference is 1 percentage point or 100 basis points.
• If an interest rate drops from 3.10% to 3.02%, that’s a decrease of 0.08 percentage points or 8 basis points.

How Are Basis Points and Percentage Points Used in Crypto Trading Fees and Funding Rates?

In crypto markets, fee-related information such as transaction fees and perpetual contract funding rates are typically expressed in basis points to highlight small changes. When comparing two yields or proportions, percentage points are more commonly used.

Funding rates are periodic fees exchanged between long and short positions to keep contract prices in line with spot prices. For example, if a funding rate moves from 0.01% to 0.03%, that's an increase of 2 basis points (or 0.02 percentage points). On a notional position of 10,000 USDT, a funding rate difference of 0.02% means paying an extra 2 USDT per settlement.

If a trading fee decreases from 0.10% to 0.08%, that's a reduction of 0.02 percentage points or 2 basis points. For a trade volume of 100,000 USDT, your cost drops from 100 USDT to 80 USDT—a savings of 20 USDT.

APY (annual percentage yield), which considers compounding, might rise from 5.00% to 5.20%. That’s an increase of 0.20 percentage points or 20 basis points.

How Do You Identify Basis Points and Percentage Points on Gate Announcements and Interfaces?

On Gate’s announcements or fee pages, focus on both the units and what they refer to:

• “Increase of 25 basis points” usually means a fine adjustment in rates or fees.
• “Increase of 1 percentage point” refers to the direct difference between two percentages.

Step 1: Check the unit. “Basis points” always refers to increments of 0.01%; “percentage points” is the direct numeric difference between two percentages.

Step 2: Check the context. Funding rates, fees, and lending rates typically use basis points; changes in yield or proportion use percentage points.

Step 3: Convert and assess the impact on your position size or trading volume to estimate real costs or returns, paying attention to the settlement period and whether the change is one-time or ongoing.

As of 2026, major exchanges and brokers widely use “basis points” in rate and fee adjustment announcements to communicate minor changes precisely.

How Do Basis Points and Percentage Points Affect Your Borrowing and Leverage Costs?

Every basis point can directly affect your costs or returns. An increase of just 10 basis points in lending rates may seem minor but can add up significantly with high leverage or large positions.

Example: If the annual borrowing rate rises from 8.00% to 8.10% (+10 basis points) on a loan of 50,000 USDT, your yearly interest increases by 50 USDT. If your funding rate also increases by another 5 basis points, the combined effect further raises your total holding cost. Misreading these units can lead to miscalculating risk—always review announcements and recalculate before placing orders.

Are Basis Points, Percentage Points, and Percentage Change the Same Thing?

No, they are not the same.

• A percentage point is the absolute difference between two percentages.
• Percentage change is the relative change compared to the original value.

Example: If a rate goes from 2.00% to 2.25%, that’s a difference of 0.25 percentage points (25 basis points). However, the percentage change is (0.25% ÷ 2.00%) = 12.5%. Mistaking “12.5%” as “12.5 percentage points” would greatly overestimate the change.

Common Misconceptions About Basis Points and Percentage Points

Mistake #1: Treating “up by 10%” as “up by 10 percentage points.” If yield increases from 10% to 11%, that’s up by only one percentage point—not ten.

Mistake #2: Confusing “10 basis points” with “10%.” Ten basis points equal just 0.10%, not ten percent.

Mistake #3: Using basis points for price movements. Basis points are best for rates, fees, and yields; price changes should be expressed as percentages or amounts for clarity.

Mistake #4: Ignoring settlement periods. Funding rates settle periodically—the same change in basis points can have different total cost impacts depending on how long you hold your position.

Key Takeaways and Practical Tips for Basis Points and Percentage Points

Basis points and percentage points address different needs: precision (“basis point,” where one percentage point = 100 basis points = 1%) versus straightforward difference (“percentage point”). Use basis points for accurate adjustments in rates and fees; use percentage points for simple comparisons in yields or proportions. In practice, always identify the unit and what it applies to, then calculate its effect on your actual position or transaction amount, considering settlement cycles and effective dates in announcements. Understanding and correctly using these terms will help you avoid misjudging risks and enhance your ability to interpret rate and fee updates accurately.

FAQ

How Many Percentage Points Is One Basis Point?

One basis point equals 0.01%. In other words, there are 100 basis points in one percent. The term "basis point" is widely used in finance to express very small changes in percentages with precision. For example, if an interest rate increases from 3% to 3.25%, you’d say it has risen by 25 basis points rather than by “0.25%”—this makes communication clearer and more precise.

Why Does Gate Use Basis Points Instead of Percentages in Trading?

Basis points allow for more precise representation of small changes in trading fees and funding rates, avoiding potential misunderstandings about numbers. For example, a trading fee of “0.05%” could be misread—but “50 basis points” is immediately clear. On Gate’s spot, derivatives, and lending platforms, rates are typically displayed in basis points as an industry standard to help users calculate costs accurately.

Are Basis Point Changes and Percentage Changes the Same Concept?

No—they are different concepts.

• Percentage points and basis points both measure absolute differences.
• A basis point is simply a smaller increment. For example, if an interest rate rises from 2% to 3%, that’s an increase of one percentage point or 100 basis points. However, if you say “interest rate increased by 50%,” you’re describing relative growth: starting from 2%, multiplying by 1.5 gets you to 3%. Always distinguish between these concepts when trading.

How Do You Quickly Convert Between Basis Points and Percentages?

Just remember this formula: Basis Points ÷ 100 = Percentage (%). Conversely: Percentage × 100 = Basis Points. For example, a fee rate of “0.05%” multiplied by 100 equals “50 basis points.” If you see “250 basis points,” divide by 100—it’s “2.5%.” Gate’s calculators and trading interfaces often show both units automatically, but knowing how to convert lets you quickly verify cost calculations yourself.

How Can You Tell Which Lending Platform Is Cheaper When Rates Are Quoted in Basis Points?

Simply compare the number of basis points—the lower the number, the lower your interest cost. For example, if Gate’s annual lending rate is “500 basis points” (5%) while another platform offers “600 basis points” (6%), Gate is cheaper by 100 basis points. Note that some platforms may switch between quoting in percentages or basis points—make sure you convert everything into the same unit before comparing for a true cost assessment.