Whether you're seeking a variable rate business loan or credit card or are looking to refinance your building, it behooves you to have a good knowledge of the prime rate. The Wall Street Journal publishes this all-important number based on the Federal Reserve Bank's decisions.

If your business is in the financial sector, you also need to keep up on prime rate listings. They can affect consumer borrowing and spending, which influences the entire economy. Here is what you should do to stay informed:

1. Check newspapers or online sources for the latest prime rate forecast.

2. Determine the current prime interest rate before applying for loans with prime rate lenders.

3. Keep abreast of all prime rate news that can have an affect on your business so you're not blindsided by a sudden rise or fall.

Action Steps
The best contacts and resources to help you get it done

Research the prime rate forecast

The prime rate is tied to the federal funds rate, which the head of the Federal Reserve (Fed) can raise and lower as he or she sees fit in response to economic conditions. These changes take place during Federal Open Market Committee meetings, which happen eight times per year. To calculate prime, add three basis points to the federal funds rate. If the Fed rate is 1.5, the prime rate is 4.5.

I recommend: Check the dates of Fed meetings on the Federal Reserve System's website (note that there are sometimes unscheduled emergency meetings). Then closely watch the financial news for the couple of weeks leading up to each date. Most times economists can forecast changes in the prime rate pretty accurately. Also visit the Wall Street Journal's complete prime rate history. It may be able to give you a one-up on trends.

See how the current prime rate will affect your loan

Most loan rates are not the same as the prime rate, but do ebb and flow as it trends. So, once you figure out prime, you still have some work to do to determine how much it will cost you to borrow. Financial institutions can base their loans on prime directly or on one of several other indexes that trend off of it.

I recommend: Go to Bankrate to view the latest number for the prime rate. Then go to Money Cafe to see how loan indexes, like the LIBOR, usually correlate to prime. Contact your lending institution to see exactly what number it uses to calculate its loans. Note that a lender can still raise or lower the rate due to your credit risk so it may not be the same as the answer you get.

Keep up to date on bank prime rate news

Prime rate changes can affect not only loans but also interest on savings accounts, CDs and bonds. That's because banks are using prime rate as a basis for their savings products too, with reductions in the rate hurting you instead of helping. If you have a lot of money tied up in savings, it's in your best interest to stay informed.

I recommend: Visit Bloomberg at least once a month to see how the Treasuries rates are looking in reaction to changes in prime. If you find your savings interest falling considerably, read Walletpop's article on avoiding cashing out prematurely so you don't make an uneducated mistake.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Don't get an adjustable rate loan you can't afford trusting that the prime lending rate will go down. Forecasts are never 100% accurate and you could end up defaulting.

Whether you're a business that wants to refinance or a bank considering rates for long term loans, a prime rate forecast is a necessary tool when you conduct business. The future bank prime rate makes a difference in future profit or loss. It's important to find a service that gives accurate information.

Current prime rate, business prime rates and prime rate news all play a role in the business decisions made every day. In order to cut the cost of doing business, savings on interest is one of the best tools. Banks need it, too. They need to set the best rates for loans loan just as the borrower needs to find the best rate.

1. Make your business loans with confidence when you know the current prime lending rate.
2. Use prime rate news to improve your business income or reduce your business expenses.
3. Set rates with ease when you have the latest prime rate news and forecasts.
   

Action Steps
The best contacts and resources to help you get it done

Get information on the current prime lending rate for business decisions

Businesses need a way to judge the rates that banks offer and what better than a check on the bank prime rate. There are several services that bring the prime rate to businesses. These offer daily updates so you're always aware of the best price.

I recommend: Bloomberg provides information about prime rate and other statistics, not only for the U.S., but also internationally. They state the LIBOR, stock indices and other financial data as well. Dow Jones & Company brings the Wall Street Journal online and, with it, the rate normally quoted when other companies offer prime rate information.

Check prime rate listings whether you're a depositor or borrower

There are services that find the best bank to lend or the best rate for deposits. These services are for businesses both large and small and make the money work harder for your company.

I recommend: HSH™ Associates, Financial Publishers offers consumer loan information and include the prime rate as part of the package. They also include information for lenders. William J. Rhind and Associates offers a deposit service that tracks prime and finds the best place to deposit business assets for the highest return.

Find service that sets rates for prime rate lenders

A prime rate quote, federal funds rate, federal discount rate and forecast of these rates are important when setting a lending rate. Lenders need both the forecast and present rate to adjust their rate for a profit. It's important to have the right information so you bring in business and not give money away.

I recommend: Bankrate offers information not only about the prime lending rate but also the Federal Discount Rate, Fed Funds Rate and 11th District Cost of Funds. Financial Forecast Center specializes in both the creation and publication of forecasts of all things related to money such as the forecast of federal prime rate.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Use the current prime interest rate to your advantage. A 1% savings on loans or improved interest on money market makes a huge difference in your bottom line.

Prime rate education and training can help you understand how the Federal Reserve and the current prime interest rate affect the interest rate you can get on a loan. If you plan to become a lender, the prime rate forecast and other tools associated with the prime rate will be an important area for you to learn.

When it comes to gaining education and training, you have a variety of options. Depending on your goals, you may want to get a degree in finance. For those who don't need advanced training, it may be beneficial to consider the following choices:

1. Learn the basic information for the federal prime rate.

2. Focus your education on the Federal Reserve and its role in lending.

3. Take classes specific to interest rates and the risk associated with interest rate management.

Action Steps
The best contacts and resources to help you get it done

Find out how the federal prime rate works

There are many sources online that provide basic information for free. Whether you need to learn what the prime rate is, who determines the prime rate or what the role of the prime interest rate is, these sources can provide quick, easy-to-understand information. Some online sources cater to non-finance majors, meaning they provide the information without using financial lingo.

I recommend: Learn the basics of the prime rate, find out the current prime rate and find out what areas of finance the prime lending rate affects at Bankrate. For a more in-depth overview of federal prime rate, visit FedPrimeRate.com, which offers a variety of tools for understanding the prime rate.

Get prime rate education and training specific to the Federal Reserve

What is the role of the Federal Reserve and how does it affect the prime rate? These are questions that online sources can answer. Depending on your goals for your education, this may be an area worth exploring.

I recommend: Learn more about how the Federal Reserve determines the prime rate and discover how prime rate lenders utilize it at Porias.com, a personal finance magazine. The financial education section offered by Branch Banking and Trust Company (BBT) covers the topics of the Federal Reserve and prime rate.

Sign up for business prime rates classes

Many organizations and lenders use the prime rate to determine interest rates and to calculate other financial considerations. Classes on interest rate risk management and interest rates can help you learn more about the prime rate.

I recommend: The New York Institute of Finance offers a virtual course on interest rate risk management. It covers topics that affect the bank prime rate and includes areas like caps, floors, collars and swaps. Ethan Hathaway offers an instructor-led class on interest rates and currency exposure. You can download a class brochure at its website.

The U.S. prime rate is a short-term interest rate used in the country's banking system. The prime rate is set and monitored by the U.S. Federal Reserve, a government entity similar to a central bank. It is a base rate for many loans and is used as the basis for rates of interest for consumer loans. The prime rate also has an affect on other short-term interest rates. For example, the prime rate is typically 3 percentage points above The Fed funds' target rate.

Action Steps
The best contacts and resources to help you get it done

Federal Open Market Committee (FOMC)

The Federal Open Market Committee is a group within The Fed that is made up of seven governors from The Fed and five presidents from Federal Reserve banks. The group meets eight times a year to determine if any changes are needed in short-term interest rates.

I recommend: Path to Investing provides information on the process of an FOMC meeting.

Intermeeting rate adjustment

An intermeeting rate adjustment is a change in the short-term interest rates put forth when the FOMC convenes an emergency meeting.

I recommend: The Federal Reserve Board provides a schedule of meetings and notification of any emergency meetings that come up. Most FOMC meetings are closed to the public.

Fed funds rate

The Fed funds rate is an interest rate directly related to the prime rate. The Fed funds rate is the interest rate that U.S. banks borrow from each other overnight. This is done through one of the 12 regional Federal Reserve banks. This rate not only affects the prime rate, but also global interest rates.

I recommend: The Federal Reserve Bank of New York provides an expanded definition of the Fed funds rate.

U.S. Federal Reserve

The U.S. Federal Reserve is a system that acts as the central bank of the United States. The Fed, as it is well known, controls some of the interest rate values that affect interest rates on a local level.

I recommend: Read more about the U.S. Federal Reserve on its website.

Short-term rates

Short-term rates are interest rates that only provide a specific rate for a year or less. Many short-term interest rates, such as the prime rate and Fed funds target rate, are controlled by the U.S. Federal Reserve.

I recommend: Bankrate provides a list and description of the top short-term interest rates in the U.S. and around the world.

Prime rate forecast

A prime rate forecast is when a person or company takes a look at historical prime rate data and uses it to predict an upcoming trend. This can be useful when making borrowing and lending decisions.

I recommend: Investopedia provides information about predicting prime interest rates using a number of methods.