What is the prime rate?
The prime rate is the interest rate banks or lenders charge their most preferred and credit-worthy customers. Often, loan products like personal and automobile loans use the prime rate as a base rate. Credit cards and certain types of commercial financing may use the prime rate as a base as well. Typically, personal loan and credit card customers are charged interest rates that are at least a few points higher than the prime rate. As the prime rate is tied to credit, interest rates increase as creditworthiness declines. The rate also fluctuates depending on economic conditions. Furthermore, the prime rate may vary among different banks. Each bank or financial institution quotes its own prime rate. Often, financial institutions choose to offer prime rates that have been set by large commercial banking institutions. In the United States, some financial institutions may look to the Wall Street Journal for the average prime rate of the more prominent commercial banking institutions. When b
Prime means “best,” and this rate is what banks charge their best commercial customers for loans. The prime changes often, is reported daily in The Wall Street Journal, and is used as a reference point for many businesses. For instance, the prime rate is used by some financial institutions to set the APR for credit cards.
The Prime Interest Rate is the interest rate charged by banks to their most creditworthy customers (usually the most prominent and stable business customers). The rate is almost always the same amongst major banks. Adjustments to the prime rate are made by banks at the same time; although, the prime rate does not adjust on any regular basis. The Prime Rate is usually adjusted at the same time and in correlation to the adjustments of the Fed Funds Rate. The rates reported below are based upon the prime rates on the first day of each respective month. Some banks use the name “Reference Rate” or “Base Lending Rate” to refer to their Prime Lending Rate. A graph of the Historical Graph Click here for historical graph from 1930 through 2008.
