Credit Card Glossary: Terms and Definitions
Confused by credit card terms? CreditCards.com's glossary of credit card definitions will help. From account holder to Regulation Z, we have defined the most-common and most-confusing credit card terms.
- Federal funds rate
- The federal funds rate is an interest rate set by the Federal Reserve Board's Federal Open Market Committee. It is the rate at which banks will loan each other money overnight, and it is an important rate to holders of variable rate credit cards. That's because the federal funds rate is precisely three points lower than the prime rate, and the prime rate is the index used to set interest rates on variable rate credit cards. So when holders of variable rate credit cards read "Fed raises rates," it means the rates are going up on their credit card balances. The Fed will raise the federal funds rate to lower inflation; it will lower the rate to stimulate a lagging economy.