Browse Banking

Basic Interest Rate Concepts

Core banking rate terms for interest rates, bank interest, and basis-point measurement.

Basic interest rate concepts are the core units used to describe the price of borrowing money or the return paid for holding money in an account or instrument.

Use this branch before comparing products, because rate language is the foundation for later topics such as APY, floating rates, spreads, and central-bank rates.

Key Terms in This Branch

TermWhy it matters
Interest RateThe basic percentage price of borrowing or return for lending/depositing money.
Basis PointA precise unit for small rate changes: 1 basis point equals 0.01 percentage points.
Bank InterestInterest paid by or to a bank on accounts, loans, or other bank products.

Example

If a loan rate rises from 6.25% to 6.75%, the increase is 50 basis points, not 0.50 basis points. That difference matters when estimating payment changes, interest expense, and rate sensitivity.

Common Mistakes

  • Confusing percentage points with percent changes.
  • Treating every interest rate as an annual rate without checking the period.
  • Ignoring whether the rate is quoted before or after compounding.
  • Comparing bank interest on different products without matching balance, fee, and timing assumptions.

In this section

Choose a subsection first. Deeper term pages live inside each subsection, which keeps large topic hubs readable.

Bank Interest

Bank interest is the amount paid or earned on deposits, loans, or bank credit balances over time.

Basis Point

A basis point is one hundredth of one percentage point and is used to quote small changes in rates, yields, and spreads.

Interest Rate

An interest rate is the price of borrowing or the return on lending, saving, or holding interest-bearing assets.

Revised on Sunday, June 21, 2026