 TITLE: What Is the Prime Rate? CONTENT: What Does the Prime Rate Affect?\n--------------------------------\nThe prime rate affects nearly all credit products with interest. Anytime the federal funds target rate is changed, the prime rate will generally follow suit. But the extent of the impact depends on whether the financial product in question has a variable or fixed interest rate.\nCredit card issuers charge an interest rate that is well above the prime rate, with the average interest rate on credit cards 16.3% as of May 2021. Most credit cards have a variable rate, and cardholders are assessed a rate based on their creditworthiness. So, if the available rates are between 9.99% and 24.99%, the best-qualified consumers could nab a 9.99% interest rate. On the other hand, applicants with lower scores could receive the 24.99% rate.\nIf the federal funds target rate is adjusted, your credit card's annual percentage rate (APR) could trend in the same direction. These updates are usually reflected on your credit card statement within two billing cycles.\nLoan products with fixed interest rates, including personal loans, auto loans and fixed-rate mortgages, aren't impacted by changing rates in the same way. If you have existing fixed-rate debt, you won't experience interest rate fluctuations if rates change. The interest rate you received when you were approved for the loan will remain intact until you pay the balance in full. Prime rate could still influence the interest rate you receive when you apply for a new, fixed-interest loan product, however.\nLoan products with variable rates, like home equity lines of credit (HELOCs) and adjustable-rate mortgages, are heavily impacted when the prime rate changes. As the rate rises, mortgage payments can increase and vice versa. If the changes are drastic, refinancing your home loan could become a viable option to make your monthly mortgage payments more affordable. END