The short answer
A basis point is 0.01%. A markup of 25 basis points means 0.25% above interchange. On $500,000 of annual volume, ten basis points is $500. On $5,000,000, it is $5,000. Providers quote in basis points partly for precision and partly because the numbers sound smaller.
Quick conversions
100 bps = 1%. 25 bps = 0.25%. To find annual cost, multiply annual volume by basis points and divide by 10,000. $2M at 30 bps is $6,000 a year in markup.
Where to focus
Markup is only part of the cost. A 15 bps markup with heavy downgrades and $80 in monthly fees beats nobody. Always convert everything back to effective rate.
Key takeaways
- 1 basis point = 0.01%
- Annual markup = volume × bps ÷ 10,000
- Low markup with high downgrades is not a good deal
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