AXPAmerican Express Company

American Express is not only a payment network but a lender: it issues its own cards and carries the credit risk itself.

The difference from Visa and Mastercard is fundamental. They run a network and take a slice of the transaction, leaving default risk with the issuing bank. American Express combines both roles: it is network and issuer, so it earns more per transaction, but when the economy weakens, card losses land on its own books.

The second pillar is annual fees on premium cards. The customer pays for a bundle of benefits, and the company designs that bundle to retain an affluent audience: it spends more and pays on time. Hence a historically better credit book than mass-market issuers.

Merchant fees at American Express are higher than competitors', which limits acceptance at some chains — expanding acceptance is continuous work. The principal risk is the consumer cycle: travel and restaurant spending falls first. The company pays a dividend.