The Prime Rate (often referenced as the Wall Street Journal Prime Rate) is the foundational reference rate used throughout the consumer finance ecosystem.
In the United States, the Prime Rate is tied directly to the Federal Funds Target Rate set by the Federal Reserve's Federal Open Market Committee (FOMC). Historically, the Wall Street Journal Prime Rate is calculated as: Prime Rate = Federal Funds Upper Target Rate + 3.00%
Almost all variable-rate consumer debt products (including Home Equity Lines of Credit / HELOCs, variable auto loans, personal lines of credit, and credit cards) are priced as: Index (Prime Rate) + Margin (Lender Spread).