SHOP PRODUCTS
Houzz Logo Print
lainy_gw

What's the difference between 'point' and 'percent'?

Lainy
20 years ago

I've got a basic grounding in investment terminology but this one recently threw me. And since the person who used it was trying to sell something, I hesitated to ask them for a clarification. I'm confused between the usage of 'point' and 'percent' in this situation:

I currently have some money in a "high (ha!) yield" savings account which is currently paying - because it is a variable rate and changes on the 1st of each month - interest at 1.14%. Not sure if this is APR or actual yield.

My bank's investment person called to say that if I wanted to earn a "better" rate of interest, I should consider putting some or all of the money into 7-day floating notes. I asked what the rate was on these notes and was told that "it is nine-tenths of a point."

What I am unclear about is whether "9/10 of a point" is the same as 0.9%. If so, why not just say "point-nine percent"?

Now I do know that while the 1.14% interest is subject to tax, supposedly the interest received on the floating notes is completely tax free. So if it is indeed 0.9%, I would have to somehow calculate whether or not that 1/4-percent difference in money actually received would actually come out to more money in my pocket versus my net after having to pay taxes on it when I file my return (or more correctly, estimated tax payments).

But it would be a good starting point to know whether we are talking apples and apples (both percents) or apples and oranges (one a percent and a 'point' being something else). So what the heck IS a "point" anyway, when talking about interest rates??

Comments (6)