The prime rate is the base interest rate that large US commercial banks post as the starting point for pricing loans, and the index on which many variable-rate consumer loans are built. The Federal Reserve defines it as the rate posted by a majority of the top 25 insured US-chartered commercial banks, and calls it one of several base rates banks use to price short-term business loans. No statute fixes it, yet it moves in step with Fed policy. Savers meet the same Fed decisions from the other side of the bank, in the bill yields and cash accounts compared in the safe investments hub.
How is the prime rate set?
By convention, banks set prime 3 percentage points above the top of the Federal Reserve's federal funds target range, and move it whenever the range moves.
The rule is a market habit, not a regulation. The Wall Street Journal defines its US prime rate as the base rate on corporate loans posted by at least 70% of the 10 largest US banks, and those banks move together. A new prime normally applies from the day a new target range takes effect, which is the day after a Federal Open Market Committee decision is announced.
| Prime changed on | Top of the federal funds target range | New prime rate |
|---|---|---|
| December 16, 2008 | 0.25% | 3.25% |
| December 17, 2015 | 0.50% | 3.50% |
| March 16, 2020 | 0.25% | 3.25% |
| July 27, 2023 | 5.50% | 8.50% |
| December 11, 2025 | 3.75% | 6.75% |
| September 17, 2026 | 4.00% | 7.00% |
The habit is old enough to look like a law. In the Fed's daily data since April 19, 1994, prime sat exactly 3 points above the target on 8,171 of 8,201 days; the other 30 were never more than two days in a row, each a lag right after a rate decision. Before 1994 the gap wandered: from 1984 to 1989 it ranged from 1 to 2.75 points. Until December 2008 the Fed set a single target rate rather than a range, so the convention then meant that target plus 3.
What is the prime rate today?
The prime rate stands at 7.00% (Federal Reserve Board, as of Nov 2, 2026), 3 points above the top of the federal funds target range of 3.75% to 4.00%.
Banks raised it from 6.75% to 7.00% on September 17, 2026, the day after the Federal Open Market Committee lifted the target range by a quarter point to 3.75% to 4.00%. The committee held the range on October 28, and the Fed's H.15 release showed a 7.00% bank prime loan rate on every day from October 23 to 29. The Wall Street Journal's Money Rates table of October 30 gave the same 7.00%, with a 52-week low of 6.75%. Prime had stood at 6.75% since December 11, 2025, after three quarter-point cuts in late 2025 brought it down from 7.50%. In the previous cycle it peaked at 8.50%, its highest since March 2001, from July 27, 2023 until it fell to 8.00% on September 19, 2024.
Prime can only move when the target range does, and the committee's next scheduled meeting is on December 8 and 9, 2026. Nothing about the decision is known in advance.
Which loans follow the prime rate?
Prime is the index behind most credit card rates, a common index for home equity lines of credit and the base for the SBA's caps on 7(a) small-business loan rates.
Each of these loans adds a margin, fixed in the contract, to the index:
- Credit cards. The CFPB describes the rate on most card accounts as the prime rate plus an APR margin, and found the average margin on revolving accounts reached 14.3 percentage points in 2023, the highest in recent history. Card accounts assessed interest at commercial banks averaged 22.36% in the Fed's latest quarterly figures. Regulation Z lets an issuer raise a variable rate when its index rises, but that exception does not cover raising the margin.
- Home equity lines of credit. The CFPB's HELOC booklet says the variable rate must follow a publicly available index, giving the prime rate published in major newspapers as an example, and that lenders usually quote the index plus a margin, such as 2 percentage points. By law a variable-rate plan secured by a home must carry a lifetime cap on how high the rate can go.
- SBA 7(a) loans. The rate is negotiated, but SBA maximums are pegged to prime or an optional peg rate. Variable rates may not exceed prime plus 3.0 points on loans above $350,000, rising to prime plus 6.5 points on loans of $50,000 or less: at a 7.00% prime, caps of 10.00% to 13.50%.
- Business loans and lines of credit. Banks also price short-term commercial credit off prime, which the Fed's definition names as one of their several base rates.
Fixed-rate loans are not on the list. A fixed-rate mortgage, auto loan or personal loan keeps its contract rate whatever prime does.
How much does a prime rate change cost a borrower?
A change in prime passes one for one into every rate built on it: a quarter-point rise adds $25 a year in interest per $10,000 borrowed.
Worked example: A HELOC and a credit card balance through the 2023 to 2026 rate cycle
Assume a $40,000 HELOC balance at prime plus 1.00 point, on a plan whose minimum payment covers interest only, and a $3,000 card balance at prime plus 15.00 points. Interest is shown as balance × rate ÷ 12, which ignores the daily compounding cards use.
- HELOC at the July 27, 2023 prime of 8.50%: a 9.50% rate, so $40,000 × 9.50% ÷ 12 = $316.67 a month
- HELOC at the December 11, 2025 prime of 6.75%: a 7.75% rate, or $258.33 a month
- HELOC at the September 17, 2026 prime of 7.00%: an 8.00% rate, or $266.67 a month, $8.33 more than in December and $100 more a year
- Card at a 7.00% prime: a 22.00% rate, so $3,000 × 22.00% ÷ 12 = $55.00 a month
- Card after a quarter-point rise in prime: 22.25%, or $55.63 a month, 63 cents more
- The same card with a 10.00-point margin: 17.00%, or $42.50 a month, $12.50 less than at a 15-point margin
On these figures the 1.75-point fall in prime from July 2023 to December 2025 lowered the HELOC bill by $58.33 a month, but on the card a 5-point difference in margin outweighs any single Fed move many times over. How daily compounding raises the true cost of a card rate is worked through in APY vs APR, and the compound interest calculator shows how fast an unpaid balance grows at a given rate.
How does prime differ from the fed funds rate, SOFR and the discount rate?
The other three are wholesale rates at which banks and dealers borrow, mostly overnight; prime is the base banks post for customer loans, about 3 points higher.
| Rate | What it is | Who sets or publishes it | October 29, 2026 |
|---|---|---|---|
| Prime rate | Base rate for bank loans to customers | Each bank; surveyed by the Fed and the Wall Street Journal | 7.00% |
| Federal funds target range | The Fed's policy target for overnight unsecured loans between banks | Federal Open Market Committee | 3.75% to 4.00% |
| Effective federal funds rate | Volume-weighted median of overnight federal funds trades | Federal Reserve Bank of New York | 3.88% |
| SOFR | Cost of borrowing cash overnight against Treasury securities | Federal Reserve Bank of New York | 3.94% |
| Discount window primary credit rate | Rate on the Fed's own loans to banks | Federal Reserve | 4.00% |
Prime sat 3.12 points above the effective federal funds rate that day and 3.06 points above SOFR. The federal funds rate and SOFR entries cover how each overnight benchmark is calculated. Two other uses of the word are unrelated to the rate: a prime money market fund is one allowed to hold bank and corporate debt, and a prime borrower, in lending shorthand, is one with a strong credit record. Treasury bill yields follow the overnight rates, not prime, and the T-bill rates today page shows the latest.
Where do you see the prime rate?
You see prime in credit card rate tables, HELOC disclosures and statements, small-business loan quotes and the Fed's daily H.15 release.
- Credit card applications. The rate table must name the index, such as the prime rate, and say that the rate varies, but Regulation Z's commentary bars it from showing the index's current value or the margin. Subtracting prime from the APR quoted gives the margin: 22.00% at a 7.00% prime means 15 points.
- HELOC disclosures. Regulation Z requires the lender to name the index and a source for it, explain how the margin is added, and state how often the rate can change and any limits on changes.
- Loan quotes. SBA rate caps are written as prime plus a number of percentage points, and a quote of prime plus 2 means 9.00% at a 7.00% prime; the same margin is sometimes given as 200 basis points.
- Fed releases and the press. The H.15 release lists the bank prime loan rate for each business day, the Wall Street Journal prints its prime in the Money Rates table, and the St. Louis Fed's FRED database carries the daily series back to 1955.
How each Fed decision travels into bill yields and savings rates is traced in how Fed rate decisions affect T-bill rates.
What mistakes do people make with the prime rate?
Most misreadings treat prime as a price, when it is an index: borrowers pay prime plus a margin, and only variable-rate loans follow it.
- Thinking the Fed sets prime. The Federal Open Market Committee sets the federal funds range and banks set prime. The 3-point link has held since 1994, but it is a convention, and the gap was different before then.
- Using the wrong prime. Under Regulation Z a lender cannot change a HELOC or card rate based on its own prime. Agreements name a published prime and may fix the day it is read; the rule's commentary gives the example of the highest prime published in the Wall Street Journal two business days before a statement's closing date.
- Forgetting the teaser rate and the caps. A HELOC's introductory rate, which the CFPB says may last a short period such as six months, is not based on the index and margin used later. Every variable-rate HELOC must have a lifetime cap, and some plans also limit how far the rate can fall.
- Expecting savings rates to match. Prime is a lending rate, so a 7.00% prime says little about what deposits earn; banks set savings rates separately, as the high-yield savings guide explains.