Glossary
Prime rate
The prime rate is the base interest rate banks use for many variable-rate loans and credit cards, set 3 percentage points above the top of the Federal Reserve's federal funds target range.
Most credit card APRs are written as "Prime Rate + a margin", so when the Federal Reserve raises or cuts rates, the prime rate follows the next day and card APRs follow from the next billing cycle.
The Federal Reserve publishes the rate most large banks post as the bank prime loan rate; it matches the Wall Street Journal prime rate. See today's rate and its full history on our prime rate page.
Work it out
Where you’ll see it on RateHerald
Related terms
- Variable APRAn interest rate that moves with an index, usually the prime rate: the card or loan adds a fixed margin to the index, so the APR rises and falls with it.
- APR (annual percentage rate)The yearly cost of borrowing as a percentage: on a credit card, the interest rate on balances you carry; on a loan, the interest rate plus certain fees.
Sources: FRED: Bank prime loan rate (DPRIME)