5 Things You Didnt Know About American Express

By Matthew Frankel Markets Fool.com

Most Americans, as well as millions of other people around the world, are familiar with American Express (NYSE: AXP), mainly because of its charge and credit card products. However, the company has a history that dates back nearly 170 years, and many people don't know much about Amex's roots and its products, many of which are structured differently than traditional credit cards.

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1. American Express is a close cousin of Wells Fargo

American express was formed in 1850 as an express mail business, after three express mail companies combined:

  • Wells & Company, owned by Henry Wells.
  • Livingston, Fargo & Company, owned by William Fargo
  • Wells, Butterfield & Company, owned by John Warren Butterfield

The first two are the same two people who founded Wells Fargo (NYSE: WFC), which was formed two years later in 1852, when some of American Express' directors opposed expansion into California.

Image Source: American Express.

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2. Amex wasn't in the card business until 1958, and has been involved in many other endeavors.

For the first 108 years of its history, American Express wasn't in the charge or credit card business.

I mentioned that American Express was founded as an express mail business, but the company has also operated in several other areas over the years. To name some of the most significant:

  • American Express launched its Traveler's Cheque in 1891, a product that was widely used until the 1990s, when electronic payment methods led to their decline. Even so, American Express remains the largest provider of traveler's checks in the world.
  • American Express was involved in the investment banking business from 1981 through 1994, when it spun off its investment banking business to Lehman Brothers.
  • American Express formed a joint venture with Warner Communications in 1979 that created such popular television networks as MTV, Nickelodeon, and The Movie Channel. The venture's assets were sold to Viacom just five years later.

3. Amex has 110 million cards, each with an average annual spending of $17,216.

I'll save you the math. This translates to a total of $1.9 trillion spent on American Express cards in 2016 alone. In fact, this volume accounted for nearly 23% of the total credit card transaction volume in the United States.

4. American Express' flagship products aren't technically credit cards

The most well-known product issued by Amex is arguably the American Express Platinum card, which was the first premium credit card product when it was introduced in 1984, and continues to be seen as a prestigious and high value card. The platinum card was the successor to the American Express Gold Card, which was introduced in 1966, and remains a popular product issued by Amex today. And, the ultra-exclusive Centurion, or black, card, which has a $7,500 initiation fee and $2,500 annual fee, is considered to be the world's most high-end credit card.

If you don't have one of these three cards, you may not know that they're not exactly "credit cards." Specifically, these are charge cards, meaning that the balance is to be paid off every month, as opposed to credit cards, which allow you to carry a balance and pay interest. In recent years, an extended-pay option has been added to these cards, but for the most part, they are still charge cards.

5. Amex is one of the most valuable brands in the world

According to Interbrand, American Express is the 25th most valuable brand in the world. In fact, the value of the American Express brand name alone is estimated to be about $18.4 billion. This is one of the major reasons Warren Buffett is a major investor in Amex, as a strong brand gives a company pricing power and a "wide economic moat" that can help prevent the company from losing market share. Many investors have questioned why Buffett has stuck with Amex, since its "business model is under attack," as Buffett himself put it. The rock-solid American Express brand name could be the reason.

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Matthew Frankel owns shares of American Express. The Motley Fool recommends American Express. The Motley Fool has a disclosure policy.