What American Express Investors Need to Know: A Simple Business Checkup

At its core, American Express is less a bank and more like a premium membership club for the affluent. The company earns its money not by lending you cash at high interest, but by charging merchants a fee every time you use your card. Think of it as a cash register that runs on trust and exclusivity.

This model powered a record year in 2025. The company's card fee revenue hit a record $10 billion. That success came from two powerful growth engines: first, adding more fee-paying customers, with fee-paying customer acquisitions growing 8 percentage points year-over-year. Second, getting those members to spend more, as card member spending grew 9% in Q4. It's a virtuous cycle where a loyal, high-spending customer base fuels steady, predictable income.

The market has rewarded this clear business logic. Across 2025, American Express stock rose by almost 25% compared with the S&P 500 index's 16% gain. That strong performance is the simplest proof that investors see the underlying strength in a model built on premium value, not on the risky lending that can make or break traditional banks.

The Policy Storm: A 10% Interest Rate Cap

For all its premium perks, American Express carries a significant vulnerability: its lending business. That's now facing a direct policy threat that could cut into its profits. In February 2025, a bill was introduced in Congress that would temporarily cap credit card interest rates at 10%. That's a major shift from the typical rates card issuers charge, which often exceed 20% for those carrying balances.

This isn't just a minor tweak; it's a direct attack on a core profit center. Because Amex is a "closed loop" company, it issues the cards and processes the transactions. That gives it a powerful moat, but it also means the company bears the full brunt of any regulatory change to its lending model. A 10% cap would dramatically shrink the revenue it earns from interest charges, which is a key part of its overall profitability.

The market has already priced in this risk. Despite strong underlying results, including a 10% year-over-year revenue growth in Q4, Amex stock went negative early in 2026 while the broader market ticked higher. This sell-off shows investors are treating the proposed cap as a tangible threat, not just political noise. The bill's sunset clause on January 1, 2031 provides a time limit, but the uncertainty itself creates a cloud over the stock's valuation.

Viewed another way, this regulatory storm is a reminder that even a strong business can be buffeted by external forces. The bill's introduction, backed by lawmakers from both parties, highlights the political appeal of capping credit card rates. For now, the threat remains just that-a threat-with little immediate chance of passing. Yet, it's a risk that investors must watch, as it represents a potential, large-scale change to the math of Amex's lending side.

The Investor's Playbook: Dividends, Guidance, and Catalysts

For shareholders, the tangible returns are clear. Management is aggressively returning cash, with a recent 16% dividend increase signaling strong confidence in its cash flow. While the current yield is modest-around 0.9%-the focus is on the high growth rate of the payout itself. This isn't about a fat check today; it's about a rapidly growing income stream built on a profitable business.

The company's forward view is equally bullish. American Express expects 13-16% EPS growth for 2026. That's a powerful growth target, especially when paired with a premium valuation. It sets a high bar, but the underlying momentum supports it: record card fee revenue and a loyal, high-spending customer base provide the fuel.

The key catalysts now are external and internal. First is the legislative front. The fate of the 10% interest rate cap bill remains the biggest overhang. Any progress toward passage would directly threaten the lending side of the business, while a clear path to defeat would lift the cloud. That's the primary policy risk to watch.

Second is the company's own execution. The goal is to keep growing its premium customer base and spending, even as regulatory uncertainty lingers. The recent 9% card member spending growth in Q4 shows the model can still work. Sustaining that momentum through 2026 renewals and marketing campaigns will be critical to hitting those aggressive EPS targets.

In short, the playbook is straightforward. Investors are being asked to bet on management's ability to grow earnings rapidly while navigating a political storm. The high dividend growth and strong guidance provide the incentive, but the path depends on both external policy outcomes and internal customer loyalty.