What does Prime Rate (prime interest rate) mean?

As meanings usually change over time, so did the prime interest rate mean the most convenient interest rate a bank would offer, but only to their top clients (the most responsible borrowers). Now, the prime interest rate changed its meaning, and it comes to signify that interest rate which is slightly higher than the rates set by the Federal Reserve.

Certainly the prime interest rates differ from one banking institution to the other, but the point of reference is and remains the rates indicated by the Wall Street Journal. It is the index of reference for all major banks, and the loan products services (credit cards, mortgages, auto and so on) are tightly depending on this set interest rate. As the Federal Reserve index fluctuates, so will the prime rate as well. Currently Wall Street Journal Prime Rate is being set at an index of 3.25.