If you just checked your credit card statement and felt a tiny bit of relief, you aren't imagining things. Money is finally getting slightly cheaper. After a brutal stretch of high interest that felt like it would never end, the financial weather is shifting.
Right now, the prime rate is 6.75%.
It’s been sitting at that number since December 11, 2025. That was the day the biggest banks in the country—the ones like JPMorgan Chase, Bank of America, and Citibank—lowered their base lending rates in lockstep with the Federal Reserve.
The Current State of Your Wallet
Basically, the prime rate is the "base" interest rate banks charge their best corporate customers. But unless you’re a Fortune 500 CEO, that doesn’t really matter to you. What matters is that the prime rate is the foundation for almost every consumer loan.
If you have a credit card with a "variable APR," it is likely calculated as the Prime Rate plus a certain percentage. If you have a Home Equity Line of Credit (HELOC), it probably moves every time the prime rate moves.
Here is how we got here:
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- January 13, 2026: Prime rate remains steady at 6.75%.
- December 2025: Dropped from 7.00% to 6.75%.
- October 2025: Dropped from 7.25% to 7.00%.
- September 2025: Dropped from 7.50% to 7.25%.
You’ve probably noticed the pattern. We are in a "cutting cycle." The Federal Reserve, led (for now) by Jerome Powell, has been trimming interest rates to keep the labor market from cooling off too much.
Why What Is The Prime Rate Currently Matters for 2026
Honestly, 6.75% is still pretty high if you look at the last decade. Back in early 2022, the prime rate was a tiny 3.25%. We aren't going back to those "free money" days anytime soon.
But context is everything.
Last year, at the peak of the inflation fight, we were staring down an 8.50% prime rate. That was painful. Now, with the fed funds rate sitting in a target range of 3.50% to 3.75%, the 6.75% prime rate represents a significant thaw in the frozen credit markets.
Economists at Goldman Sachs and UBS are mostly in agreement: the Fed is likely to pause for a bit. They want to see how the job market handles the winter. There is a lot of noise right now about who will replace Jerome Powell when his term ends in May 2026. Names like Kevin Hassett and Kevin Warsh are being tossed around. Why does that matter to you? Because a new Fed Chair could drastically change how fast the prime rate drops—or if it starts going back up.
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The 3% Rule
There is a simple bit of math that explains the prime rate. It is almost always exactly 3 percentage points higher than the bottom of the Federal Funds Target Range.
$Prime Rate = Fed Funds Lower Bound + 3.00$
Since the Fed's current lower bound is 3.75% (or 3.50% depending on which end of the range you're looking at), the math holds steady at 6.75%. If the Fed cuts by another 25 basis points in March, you can bet your bottom dollar the prime rate will hit 6.50% by the next morning.
What Most People Get Wrong
A lot of people think that because the prime rate is 6.75%, that’s the rate they should be getting on a mortgage.
Nope. Not even close.
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Mortgages are a different beast entirely. They track the 10-year Treasury yield, which is influenced more by long-term inflation fears than by what the Fed does on a Tuesday afternoon. In fact, we’ve seen cases lately where the Fed cuts rates but mortgage rates actually go up because investors are worried about future inflation.
Credit cards are the opposite. They are tethered to the prime rate. If you're carrying a balance, a 1% drop in the prime rate over the last six months might save you a few hundred dollars a year in interest, but it won't solve a debt crisis. Most APRs are still hovering around 20% to 24%.
Looking Ahead: Will It Drop Further?
If you’re waiting for the prime rate to hit 5% before you take out a business loan or tap into your home equity, you might be waiting a long time.
The "dot plot"—that famous chart where Fed officials hide their secret predictions—suggests only one or two more cuts for the rest of 2026. They are worried about "sticky" inflation. Also, there's the whole "government shutdown" drama from late 2025 that messed up a lot of economic data, making the Fed extra cautious.
Michael Feroli, a chief economist over at J.P. Morgan, has suggested that unless the unemployment rate spikes, the Fed is going to take it slow. Slow is the keyword here.
Actionable Steps for Borrowers
- Negotiate Your APR: Now that the prime rate has fallen nearly 2% from its peak, call your credit card company. Tell them you've noticed the market rates are dropping and ask for a reduction. It works more often than you'd think.
- Wait on the HELOC: If you don't need the money today, wait until after the March FOMC meeting. There's a decent chance the prime rate could tick down another quarter-point.
- Check Your Small Business Loans: Many SBA loans are pegged directly to the prime rate. If your monthly payment hasn't gone down since December, check your contract. You might need to ask your lender for an adjustment.
The prime rate isn't just a number on a spreadsheet; it's the heartbeat of the American economy. Right now, that heart is beating a little slower, and for anyone with a balance to pay, that's finally some good news.
Next Steps for Your Finances
- Audit your variable-rate debt: Identify every loan you have that is tied to "Prime." Ensure your lenders have updated your interest rate to reflect the current 6.75% benchmark.
- Review your 2026 borrowing plan: If you are planning a major purchase, keep an eye on the January 28 Fed meeting. While a change is unlikely so soon, the "language" they use will signal whether the prime rate will stay at 6.75% through the spring or drop again in March.