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When the prime rate increases, what does this mean for you?
Let’s start with an initial question: What is the prime rate? It’s a benchmark set and used by financial institutions to determine how much interest to charge their most credit-worthy consumers. So how often does the prime rate change? And how does the current prime rate impact you?
The first prime rate was set back on December 1, 1947, at 1.75%. Since then, the prime rate has gone through many changes, with some years — such as 2001 — experiencing more than 10 changes.
However, the frequency of changes has slowed tremendously this decade; the prime rate stayed at 3.25% from December 2008 until December 2015.
Since its inception, the prime rate has risen as high as 21.5% on December 19, 1980, with the median prime rate at 6.5%.
Here is a list of accounts that could be affected by the prime rate increase:
While some financial institutions will raise rates on these types of accounts, others will keep their interest rates as-is, so check in with your accounts to see how they will be impacted.
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