Percentage point

The distinction

Interest rises from $4\%$ to $6\%$. How big is the rise?

Phrasing	Answer	Why
percentage points	$2$	$6 - 4$, the plain difference
percent increase	$50\%$	$\tfrac{2}{4}$, the change against the original

Both are correct. They answer different questions, and the gap between $2$ and $50$ is why the word exists.

Why the confusion is worth avoiding

A headline reading “interest rates rise 50%” is alarming. “Rates rise 2 percentage points” is the same event, described in a way nobody misreads.

The trap is that a percent of a percent still produces a percent, so nothing in the units warns you which reading is meant.

Worked comparison

Unemployment goes from $8\%$ to $6\%$.

$$\text{fall} = 2 \text{ percentage points}$$ $$\text{percent decrease} = \frac{2}{8} = 25\%$$

A quarter of the unemployed found work — that is the $25\%$. Two in every hundred people changed status — that is the $2$ points.

Basis points

Finance splits a percentage point into a hundred basis points, so a rise of $0.25$ percentage points is “25 basis points”. Same idea, finer grain, and used precisely because the ambiguity above is expensive.

See percent increase and decrease.