Why American Express Stock Gained 11% in August

Key Points

• American Express continues to grow despite economic pressure.

• It has a fee-based model that targets affluent and resilient spenders.

• Lower interest rates should boost spending.

• 10 stocks we like better than American Express ›

Shares of American Express (NYSE: AXP) stock jumped 11% in August, according to data provided by S&P Global Market Intelligence. The credit card and banking giant is benefiting from increased market optimism as the Federal Reserve is expected to lower interest rates.

The credit card for the affluent customer

American Express has carved out a niche as an elite credit card provider, servicing an upscale clientele with fee-based products that come with a coveted rewards program. Although it has only a fraction of competitor Visa's card membership, it has nearly double Visa's revenue. Its cardmembers are high spenders, and they're more resilient when there's pressure, making American Express resilient, too.

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In the 2025 second quarter, revenue increased 9% year over year (currency neutral), and adjusted earnings per share (EPS) were up 17%.

Image source: Getty Images.

American Express stands out from other credit card networks in several ways. One is the focus on the affluent consumer, and another is its closed-loop model. Instead of working with partnering banks or financial institutions to provide the credit for its customers to make purchases on its network, it acts as its own bank. That gives it greater control over the model and expands its platform. In contrast with other networks, it has a large and varied stream of revenue.

It also makes money on deposits, which leads to higher net interest income and higher overall net income.

Another way the company differentiates itself is with its robust rewards program and accompanying annual fees. Fee revenue increased 20% year over year in the second quarter and accounted for more than 13% of revenue.

Low interest rates should boost business

Lower interest rates generally boost economic activity, because money is cheaper and therefore easier to come by. Companies can borrow more easily, and they tend to expand their operations when money is plentiful. Individuals tend to spend more when it's cheaper to service their credit.

This works in American Express' favor in several ways. Higher economic activity is good for spending, and people with money are also more likely to take out new fee-based cards. It also means its default rates should go lower. They're generally best-in-class, and since interest rates have started to come down from highs, they're already improving.

American Express has been a reliable stock for decades, and it also pays a growing dividend. It's one of Warren Buffett's favorite and longest-held stocks, and it can still provide value for new and current shareholders.

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American Express is an advertising partner of Motley Fool Money. Jennifer Saibil has positions in American Express. The Motley Fool has positions in and recommends Visa. The Motley Fool has a disclosure policy.