If I told you I could offer a rate of 0.25%, you’d probably understand straight away—“a quarter of a percent,” simple enough. But what if I said “25 bips”? You might pause for a second, unless you’re familiar with finance lingo. Oh, and just so you know—some people say bips, others say bps, but they’re talking about the same thing.

What is a bip—or bps?

It’s a term that gets thrown around a lot in financial circles. A bip (or basis point) is a unit of measure used to describe small changes in interest rates, fees, or yields. Here’s the key bit:

100 basis points = 1 percent

So when someone says 25 bips, they mean 0.25%—a quarter of a percent.

Need some quick math?

- 1 percent = 1/100 = 0.01
- 1 basis point = 1/100 of a percent = 0.01%

So if I told you a mortgage rate has gone up to 3.25%, you could smugly reply, “Ah, so 325 bips?” And you’d be spot on.

Why does it matter?

Good question. First of all, using bips just sounds cool. It makes you sound like you’re in the know, especially if you’re not actually in finance. But beyond that, there’s a more practical reason: clarity.

Imagine you’re in a fast-moving trading floor, or even just talking rates in a noisy office. If someone says “the rate is 0.25%,” it could be misheard as “2.5%”—which is a big difference. But if they shout “25 bips,” there’s way less room for confusion. It’s precise, and in finance, precision matters.

So there you have it—bips might sound like jargon, but they’re a handy way to talk about small but important changes in rates. Next time you hear someone mention them, you’ll know exactly what they mean. And who knows? Drop it into a conversation, and you might just impress a few people.