Verbull Word of the day
Finance glossary

Prime Rate

Banking · intermediate
Definition

The interest rate banks charge their most creditworthy customers.

The prime rate is the benchmark rate banks offer their lowest-risk borrowers, typically set a few points above the federal funds rate. Many consumer loans, like credit cards and home equity lines, are priced as the prime rate plus a margin, so it moves with Fed policy.

In a sentence

Her variable loan was priced at the prime rate plus two points, so it rose when the Fed hiked.

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