What is the prime rate?
The prime rate is an interest rate determined by the Federal Reserve based on a variety of economic factors.
Banks use the prime rate as the base factor in determining the interest rate given to their customers. A bank's most creditworthy customers may receive an interest rate equal to the prime rate. Most customers will receive an interest rate on a loan at the prime rate plus anywhere from 1 to 10 percent, depending on their credit rating.
Most banks use the prime rate that is published in the Money Rates section in the Wall Street Journal to determine loan interest rates or credit card APRs.
