What is the 'Prime Rate'
The prime rate is the interest rate that commercial banks charge their most creditworthy customers. Generally a bank's best customers consist of large corporations. The prime interest rate, or prime lending rate, is largely determined by the federal funds rate, which is the overnight rate which banks lend to one another. The prime rate is also important for retail customers, as the prime rate directly affects the lending rates which are available for mortgage, small business and personal loans.
BREAKING DOWN 'Prime Rate'
Default risk is the main determiner of the interest rate a bank will charge a borrower. Because a bank's best customers have little chance of defaulting, the bank can charge them a rate that is lower than the rate that would be charged to a customer who has a higher likelihood of defaulting on a loan.

Wall Street Journal Prime Rate
An interest rate that large banks in the United States charge ... 
Prime Bank
Term used to describe the top 50 banks (or thereabouts) in the ... 
Bank Rate
The interest rate at which a nation's central bank lends money ... 
Prime
A classification of borrowers, rates or holdings in the lending ... 
Overnight Rate
The interest rate at which a depository institution lends immediately ... 
Prime Cost
A business's expenses for the materials and labor it uses in ...

Markets
Explaining Prime Rate
Prime rate is the interest rate banks charge their best (e.g. prime) customers. 
Markets
How Banks Set Interest Rates on Your Loans
Many factors go into how banks set interest rates for loans. Use this information to negotiate the best possible rate when you're borrowing. 
Markets
How Interest Rate Cuts Affect Consumers
Stock traders usually rejoice when the Federal Reserve cuts interest rates. But it’s not always best for everyone. 
Markets
Overnight Rate
Learn about how banks use this interest rate when lending to other banks. 
Investing
The Role of a Prime Broker
Understand the role of a prime brokerage, and learn about the services investment banks provide for hedge funds while in the role of being a prime broker. 
Markets
Forces Behind Interest Rates
Interest is a cost for one party, and income for another. Regardless of the perspective, interest rates are always changing. 
Markets
How Interest Rate Cuts Affect Consumers
Traders rejoice when the Fed drops the rate, but is it good news for all? Find out here. 
Markets
The Impact of the Fed Interest Rate Hike
The Federal Reserve recently raised benchmark interest rates. With much attention on the Fed's policy, here's what happens when the Fed hikes rates. 
Markets
Understanding the Bank Rate
Bank rate is a term describing the interest rate a country’s central bank charges its domestic banks on loans it makes to them. 
Investing
What is a Prime Brokerage?
A prime brokerage offers special services to certain clients.

What should ordinary borrowers know about the prime rate?
Learn more about how prime rates are used in consumer lending and how consumers may obtain better interest rates at or near ... Read Answer >> 
Is the prime rate in the US different from the federal funds rate?
Learn how the federal funds rate affects fluctuations in the prime rate and how following your bank's prime rate can help ... Read Answer >> 
What's the difference between the prime rate and the discount rate?
Learn more about the prime rate and the discount rate and how the Federal Reserve uses these rates in the U.S. economy. Explore ... Read Answer >> 
How does the Wall Street Journal prime rate forecast work?
Learn about the Wall Street Journal's prime interest rate methodology. Discover trailing financial indicators, and engage ... Read Answer >> 
How high has the prime rate ever gotten?
Discover the highest value of the prime rate in United States' history and understand the assumptions and calculations that ... Read Answer >> 
What are the most important interest rates?
Learn about the most important interest rates in the economy; the Federal funds rate and discount rate are set by the Federal ... Read Answer >>