The original rate is the interest rate that banks charge to their most favorable consumers. To get a basic credit course, you must have an excellent credit score.
The U.S. master rate is the national base rate published in the Wall Street Journal, which is calculated based on the highest rates from the largest banks in the country. The U.S. top rate is typically about 3% higher than the federal funds rate and is available on the Wall Street Journal website.
How Prime Rate Affects Your Credit Card
Many credit cards base their variable interest rates at a base rate. A variable interest rate is one that changes based on another interest rate.
For example, credit card APR may be the primary rate plus 13%. The interest rate that the credit card issuer places on top of the main course is known as “spread.” In our example, the “spread” is 13%. If the base rate is 3.25%, the current APR on the variable rate card would be 16.25%. This means that the primary rate has a direct, but usually small, impact on the financing costs you pay on your credit card when you are able to make the balance. The higher the base rate, the more you will pay to get back to credit card status. You can avoid paying interest at all by paying your credit card amount every month.
If your credit card has a variable interest rate based on the base rate, the credit card interest rate will monitor the movement of the master rate.
If the primary rate goes up, you can expect the interest rate on credit cards to rise soon. On the other hand, if the primary rate goes down, the interest rate on credit cards should decrease.
Credit card issuers do not have to notify you about interest rate changes in advance if you have a variable interest rate.
You can keep track of potential interest rate changes by paying attention to interest rate news (interest rate changes are usually major news) or by looking at rates published in the Wall Street Journal. Your current interest rate is posted on your credit card statement. Keep a close eye on your statement to capture any changes in interest rates due to changes in the principal.
What if the Prime Rate goes up?
When the primary rate increases, your interest rate will increase. To reduce the impact of increased financing costs, you can pay off your balance faster. Transferring your balance to a credit card with an introductory rate of 0% is another option. Finally, if you kept the card in good standing and have a good credit rating, the credit card issuer may be willing to lower the interest rate if you asked the question nicely.
Does your credit card use a premium rate?
Part of your credit card agreement called “How we calculate and set rates” will tell you how your credit card company determines your rate and how your credit card level will adjust if the base rate adjusts. If your credit card interest rate is based on a base rate, you will see a section with a language like “APR will differ from the market based on Prime Rate.”