A percentage point is simply the difference between two percentage values, whereas a percent describes a relative change—how much something has increased or decreased compared to an original value. If the interest rate increases from 4% to 6%, it increases by 2 percentage points, but by a whopping 50%. Both statements are true, but they mean different things—and that's why they're so easy to confuse.
To sum it up
- Percentage (%) — is one hundredth of a whole; the change to "X%" indicates a relative change compared to the original value.
- Percentage point (pp) — is the absolute difference between two values, expressed as a percentage.
- Example: The increase from 10% to 15% is 5 percentage points, or 50%.
- basis point equal to 0.01 percentage points – used in the financial sector to indicate small changes.
What is percentage?
Percent (from Latin per cent – "per hundred") means one hundredth of a whole: 1% = 1/100 = 0.01. Percentages describe the share of a part in the whole (for example, 30% voters), as well as the change of some quantity in relation to its original value (for example, the price increased by 20%).
The key point is that the percentage change is always relative to the base value . If an item costs 200 zlotys and its price increases by 10%, the new price will be 220 zlotys. A similar 10% increase on a price of 50 zlotys will result in a difference of only 5 zlotys.
What is a percentage point?
Percentage point A percentage is a unit of measurement used to express the difference between two values that are themselves percentages—interest rates, stocks, indices, or election results. It is calculated by simple subtraction: the new value minus the old value.
If a party was polling at 201 TP3T and is now polling at 251 TP3T, this means that its support has increased by 5 percentage points . You will see abbreviations in text messages. pp or pkt (percent). This difference is not indicated by the symbol "%" since it indicates a relative change.
Percentage Point vs. Percentage – Step-by-Step Examples
The easiest way to see the difference is with numbers. Take, for example, the interest rate on a deposit account, which has increased from 4% to 6% :
- Change in percentage points: 6% − 4% = 2 percentage points
- Percentage change (relative): (6 − 4) / 4 × 100% = 50% .
Both results are correct. The first shows how much the indicator itself has changed, the second shows how much it has increased compared to the baseline. A few more examples:
- The unemployment rate rose from 8% to 10% – an increase of 2 percentage points, or 25%.
- Inflation from 5% to 3% - a decrease of 2 percentage points, or 40%.
- Voter turnout increased from 50% to 60% – an increase of 10 percentage points, or 20%.
- Market share increased from 1% to 2% – an increase of 1 percentage point, but ultimately reached 100% (the share doubled).
The last example illustrates why headlines should be treated with caution. While a "100% increase" sounds impressive, in percentage points it's only 1 percentage point. Conversely, with high baseline values, a large percentage point change results in a relatively small percentage point effect.
Comparison Chart: Percentage Points vs. Percentage
| Characteristic | Interest (%) | Percentage point (pp) |
|---|---|---|
| What does it mean? | One hundredth part of the total or relative change | The difference between two percentage values |
| Type of change | Relative (relative to the initial value) | Absolute (simple difference) |
| How to calculate change | (new − old) / old × 100% | new − old |
| Record | % | p., percentage points |
| Example: 10% → 12% | increase by 20% | An increase of 2 percentage points |
| Typical use | Prices, wages, sales, stocks | Interest rates, inflation, unemployment, opinion polls |
Base points are an even smaller unit of measurement.
In the banking sector and financial markets, there is a lot of talk about basis points ( b.p.). One basis point is equal to 0.01 percentage points , or 100 bp = 1 pp. A rate cut from 5.75% to 5.50% means a reduction of 0.25 pp, or 25 basis points.
Basis points are used to eliminate ambiguity. "An increase of 1%" could mean 1 percentage point or 1% of the rate, while "an increase of 100 basis points" always means the same thing. This unit is used, among other things, when the central bank makes decisions on interest rates, loan spreads, and bond yields.
When to use percentage points and when to use percent?
- You are comparing two values that are themselves percentages. (interest rate, inflation, approval rating, voter turnout, unemployment rate)? Indicate the difference in percentage points .
- Describe the change in amount or number (prices, salaries, number of clients) in percent .
- Want to show the scale of the percentage change? ? You can enter both results: "increase by 2 percentage points or by 50%.".
- Read information about a loan or deposit Check whether the "1% increase" means a percentage point—for a loan, this can significantly impact your monthly payment.
A simple test: if both numbers you are comparing have the sign "%" and you want to show their difference after a simple subtraction, you write "percentage points".
Frequently Asked Questions (FAQ)
How much is 1 percentage point?
This is the difference of 1% between two percentage values, for example, between 3% and 4%. The relative percentage difference depends on the initial value: from 3% to 4%, the increase is approximately 33%, and from 10% to 11%, the increase is 10%.
How to calculate the difference in percentage points?
Simply subtract the old percentage from the new one. For example, 7.5% − 6% = 1.5 percentage points.
How to convert percentage points to percent?
Divide the percentage point difference by the original value and multiply by 100%. For a change from 4% to 5%: 1/4 × 100% = 25%.
What is the abbreviation for percentage point?
In Polish texts, the abbreviations "pp" or "pkt proc" are used. This distinction should not be indicated solely by "%," as this would appear as a relative change.
What is the difference between a basis point and a percentage point?
A basis point is one hundredth of a percentage point. 25 basis points equal 0.25 percentage points, and 100 basis points equal 1 percentage point.
See also
- What is the difference between fixed and variable loan interest rates?
- What is the difference between margins and markup?
- What is the difference between a circle and a wheel?
- What is the difference between WIBOR 3M and WIBOR 6M?