A basis point (bps) is a unit of measurement used in finance equal to 0.01%, or one hundredth of one percent. In payment processing, rates and markups are often quoted in basis points to make small differences more legible.
1 basis point = 0.01% 10 basis points = 0.10% 25 basis points = 0.25% 100 basis points = 1.00%
For example, a processor might say "our markup is 25 basis points over interchange" meaning 0.25%. Another might quote "50 bps" meaning 0.50%.
Basis points matter because small differences compound over high volumes. A 10 basis point difference (0.10%) on $1 million in annual processing volume equals $1,000/year. For a business doing $5 million, it's $5,000/year.
Payment professionals use basis points because it's more precise and easier to compare than fractions of percentages. "25 basis points" is clearer than "0.25%" when discussing margins.
Understanding basis points helps you evaluate competing processor quotes. When comparing interchange plus pricing proposals, the key figure to compare is the markup in basis points.
A 10 basis point difference in markup seems small but adds up. At $100,000 monthly volume, 10 bps = $100/month = $1,200/year. Negotiate your markup down by 15–25 bps if you can — at sufficient volume, this is real money.
Two processor proposals for a $200,000/month business: - Processor A: interchange + 35 bps + $0.10 per transaction (2,000 transactions/month) - Markup cost: $200,000 × 0.35% + 2,000 × $0.10 = $700 + $200 = $900/month - Processor B: interchange + 20 bps + $0.15 per transaction - Markup cost: $200,000 × 0.20% + 2,000 × $0.15 = $400 + $300 = $700/month - Processor B saves $200/month despite having a higher per-transaction fee
For interchange plus pricing, a good markup is 10–35 basis points for businesses processing over $100,000/month. Small businesses may pay 40–60 basis points. Anything over 75 basis points on interchange plus is high.
Divide basis points by 100 to get the percentage. 25 bps = 0.25%. 150 bps = 1.50%. Or multiply the percentage by 100 to get basis points: 0.35% = 35 bps.
Basis points make it easier to compare small differences in rates and communicate precisely about fractions of a percent. It's standard financial industry terminology.
Liberty Bancard quotes all markups in basis points for full transparency. Our current standard markup ranges from 20–35 basis points over interchange depending on volume. We'll show you the exact number before you sign anything.
Continue learning: Browse all 60 payment processing terms in our Payment Processing Glossary, or upload your statement for a free analysis of your current processing costs.