American Express: A Defensive Investment in a High-Interest-Rate World

In an era of persistent high interest rates and economic uncertainty, investors are increasingly prioritizing defensive stocks—companies with resilient business models and strong balance sheets. American Express (AXP) stands out as a prime candidate in this category, particularly due to its exceptional credit risk management. The company's historically low net write-off (NWO) rates and delinquency metrics underscore its ability to maintain a high-quality credit portfolio, even as broader economic pressures mount. For investors seeking stability in volatile markets, Amex's disciplined approach to risk and its premium customer base make it a compelling long-term play.

The Metrics That Define Resilience

American Express reported a net write-off rate of 2% in Q2 2025, a decline of 0.1 percentage points from both the prior quarter and the same period in 2024. This figure is not just a sequential improvement but also a testament to Amex's ability to outperform industry benchmarks. For context, the average NWO rate for major credit card issuers typically ranges between 3% and 4%, even in favorable economic conditions. Amex's ability to consistently post sub-2% write-offs highlights its robust underwriting standards and the financial strength of its customer base.

Delinquency rates further reinforce this narrative. The company's 30-day delinquency rate for Gen Z and millennial cardholders stood at 1.9%, less than half the industry average for these demographics. This is a critical differentiator: younger consumers, who are often more vulnerable to economic shocks, are behaving with surprising financial discipline. Amex's focus on premium card products—such as the Platinum and Centurion cards—has attracted high-earning, creditworthy individuals who are less likely to default, even in a tightening monetary environment.

Why Amex's Model Thrives in High-Rate Environments

The company's credit resilience is rooted in its differentiated business model. Unlike competitors that rely heavily on mass-market credit cards, Amex targets affluent customers who value premium rewards and exclusive benefits. These cardholders typically have higher income levels, stronger credit scores, and lower debt-to-income ratios, all of which reduce the likelihood of defaults.

Moreover, Amex's underwriting discipline has been a cornerstone of its success. The company employs rigorous risk assessment tools and maintains conservative reserve levels, ensuring it is well-prepared for potential downturns. For example, in Q2 2025, provisions for credit losses rose to $1.4 billion, but this increase was driven by a net reserve build and growth in total loans, not a deterioration in credit quality. This proactive approach allows Amex to navigate macroeconomic volatility without sacrificing long-term profitability.

Strategic Implications for Investors

In a high-interest-rate environment, credit card companies face a dual challenge: higher borrowing costs for consumers and increased risk of defaults. However, Amex's low NWO and delinquency rates suggest that its portfolio is insulated from these pressures. This makes the stock an attractive defensive play, particularly for investors wary of cyclical downturns.

Historically, Amex has demonstrated strong stock performance during periods of rate hikes. For instance, during the 2022-2023 tightening cycle, its shares outperformed the S&P 500, driven by its ability to maintain margins and credit quality. A similar pattern could emerge in 2025, especially if the Fed maintains elevated rates for longer than expected.

Conclusion: A Pillar of Stability in Uncertain Times

American Express's credit risk resilience is not a one-time anomaly but a structural advantage. Its low net write-off rates, coupled with a customer base of financially stable, high-income individuals, position it as a leader in the premium credit card segment. For investors, this translates to a stock that can deliver consistent returns even in challenging economic climates.

As the Fed navigates the delicate balance between inflation control and economic growth, defensive plays like Amex will become increasingly valuable. By prioritizing quality over quantity in its lending approach, American Express has built a fortress-like credit portfolio—one that rewards long-term investors with stability and predictable performance. In a world where uncertainty is the norm, Amex's disciplined model offers a rare combination of resilience and growth potential.