Also called: Basis points, bp, bps, Bips
What a basis point is
A basis point is one-hundredth of a percentage point. One basis point equals 0.01%, or 0.0001 as a decimal. That means 100 basis points equal 1%, and 25 basis points equal 0.25%. People abbreviate one basis point as “bp” and multiple basis points as “bps.”
The unit makes small rate differences easier to describe precisely. If a rate rises from 0.35% to 0.43%, it increased by 8 basis points. That is an increase of 0.08 percentage points, not an 8% increase.
Basis points make a markup easier to compare, but only the full fee calculation shows what you will pay.
How bps show up in payment pricing
On an interchange-plus quote, a processor can express its percentage markup in basis points. For example, “interchange plus 25 bps and $0.20 per transaction” means the processor adds 0.25% of the sale, plus 20 cents, on top of interchange. The 25-bp figure describes only the percentage part of that markup.
To convert a basis-point markup into a percentage, divide by 100. To estimate its dollar effect on sales, multiply the basis points by sales volume and divide by 10,000. For example, 10 bps on $100,000 in monthly sales equals $100 in percentage markup, before any per-transaction charges.
What 10 bps costs on monthly sales
| Monthly sales | $100,000 (illustrative) |
|---|---|
| Markup | 10 bps, or 0.10% |
| Percentage fee | $100 (illustrative) |
Calculation excludes per-transaction charges, interchange, network assessments, and other fees.
What bps mean for your costs
A lower basis-point number does not automatically mean a cheaper processing offer. Compare the percentage markup, per-transaction charges, and other fees together. A higher fixed charge can outweigh a lower percentage markup, especially when your average sale is small.
For example, on a $12 sale, a 10-bp reduction saves about 1.2 cents in percentage markup. If the per-transaction charge rises by 10 cents, you pay more overall despite the lower bps. These figures are illustrative.
What to watch in a quote
Basis points measure a rate, not a complete processing bill. On interchange-plus pricing, interchange is separate from the processor’s markup. Network assessments and other charges can also appear in your total. The processor markup is the part you negotiate, so compare it separately from pass-through costs.
A claim of “zero basis points” does not prove that pricing has no markup. The provider could charge through a fixed transaction fee, monthly fees, or another pricing structure. Compare the total cost on the same sales volume and transaction count, rather than choosing an offer based on its bps figure alone.
What you can actually change
- Convert the quote. Divide the quoted bps by 100 to get the percentage. For example, 25 bps equals 0.25%.
- Compare total costs. Use the same sales volume and transaction count for each offer. Include the percentage markup, per-transaction charges, monthly fees, and other listed charges.
- Separate pass-through fees. On interchange-plus pricing, identify the processor markup separately from interchange and network fees. The markup is the negotiable portion.
Frequently asked questions
How much is 1 basis point?
One basis point is 0.01 percentage points, or 0.0001 as a decimal. For example, 100 basis points equal 1%, and 25 basis points equal 0.25%.
How do I calculate a basis-point fee?
Multiply the sales amount by the number of basis points, then divide by 10,000. For example, 25 bps on a $1,000 sale equals $2.50. Add any per-transaction charges and other fees to estimate the full cost.
Does a lower bps quote mean lower processing costs?
No. A lower percentage markup can be offset by higher per-transaction or monthly fees. Compare offers using the same sales volume and transaction count, and include interchange, network fees, and other charges in the total.