How the Fed Cut Affects the Prime Rate

Bank of America, Wachovia, and Wells Fargo all cut prime lending rates.

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The Federal Reserve's key rate cut today aims to steady the markets and stem the financial crisis. But it also changes the rate consumers are charged for loans.

For consumers, it's all about the prime lending rate, which is used for everything from car loans to home equity loans. Banks typically take cues from the Fed, which means the prime lending rate often moves in tandem with the fed funds rate.

Case in point: Bank of America, Wachovia, and Wells Fargo all said Wednesday that they're lowering their prime lending rates from 5 to 4.5 percent, which matches the 0.5 percent fed rate cut.