Is American Express a good long-term investment? Its buy-and-hold prospects explained

Like getting a driver's license or graduating from college, owning a credit card is considered a rite of passage into American adulthood.

Credit card companies typically attract young customers by offering them "no fee" cards with few benefits. These companies assume, because of their cardholder's limited credit history and lack of disposable income , that they can't afford the fees that come along with more premium perks.

But Stephen Squeri turned that model on its head when he became American Express's CEO in 2018 — and shareholders have been amply rewarded since.

Mindful of his four daughters' tastes for the finer things in life, Squeri understood that affluent young people have no problem paying for a premium card — so long as they receive perks they actually want.

"The reality is," Squeri told Fortune , "these Gen Z and Millennials love premium, they love getting something that's luxe. I viewed them as educated consumers who love luxury. They also love value. I said, 'Wait a minute, these kids are smart.'"

But Squeri inherited a company in crisis, one that was still reeling from the 2015 loss of its partnership with Costco , which had accounted for 10% of American Express' global business . In addition, increased competition from premium cards by Chase and Capital One challenged Amex's once-dominant position in the luxury credit card market.

And so, Squeri "doubled down" by increasing Amex's marketing budget to focus heavily on the digital and search channels Millennials and Gen Z use — spending $4.1 billion in 2018 alone, according to the company's 10-Q .

He also orchestrated major overhauls with its Gold and Platinum cards, while drastically raising their annual fees. The revamped Gold card, for instance, introduced four times greater perks at restaurants and grocery stores, while its annual fee increased from $195 in 2017 to $325 in 2026.