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The prime rate impacts the cost of credit on consumer loans, including credit card accounts, with the rates on consumer loans moving up or down with the prime rate.
The U.S. prime rate is in principle the interest rate at which a supermajority (3/4ths) of American banking institutions grant loans to their most creditworthy corporate clients. [1] As such, it serves as the de facto floor for private-sector lending, and is the baseline from which common "consumer" interest rates are set (e.g. credit card rates).
Generally, loan interest rates will increase and decrease with the prime rate. For example, suppose a customer signs up for a credit card with a 14.99% annual percentage rate .
For example, most banks in the U.S. offer credit cards based upon the lowest U.S. prime rate as published in the Wall Street Journal on the previous business day to the start of the calendar month. For example, a rate given as 9.99% plus the prime rate will be 16.99% when the prime rate is 7.00% (such as the end of 2005).
With average credit card interest rates at an all-time high, snagging a lower rate could help reduce the interest you pay and enable you to get out of debt more quickly.
Prime rates in the US, FRG and the European Union. The prime rate or prime lending rate is an interest rate used by banks, typically representing the rate at which they lend to their most creditworthy customers. Some variable interest rates may be expressed as a percentage above or below prime rate. [1]: 8
Card issuers tie their APR rates to the prime lending rate, which typically sits at about 3.00% higher than the Fed funds rate. For instance, the prime rate gradually dropped from a historic high ...
The Consumer Financial Protection Bureau in its October 2013 report on the CARD Act found that between the first quarter of 2009 and December 2012, credit card interest rates increased on average from 16.2% to 18.5%, while the “total cost of credit,” that is, the total of all fees and interest paid by all consumers as a percentage of the ...