Finance glossary
Prime Rate
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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