Why Did Warren Buffett Invest In AXP If He Dislikes Credit Cards?

Warren Buffett may not like credit cards, but that hasn't stopped him from investing in American Express Company (NYSE: AXP).

This morning, Buffett spoke to CNBC about the issue.

“I tell students they'd be better off if they never used them,” he said. “I can't make money if I'm out borrowing at whatever the rate may be, 12%, 14%, 16%. If I'm gonna go broke if I borrow at credit card rates, I'm in trouble.”

So why has he invested in American Express? Outside of noting the widespread use of credit in America, Buffett didn't get too specific. But he did make some interesting points.

“The average American Express cardholder is charging $13,000 to $14,000 a year,” Buffett said. “The first credit card was the diner's club card. American Express came in and priced their card higher than the diner's card. But they established their card as something special; it is a superior card for someone that is a big spender.”

Ultimately, though, Buffett would prefer that credit cards didn't exist.

“If credit cards didn't exist, the economy would be better off,” he said. “People are gonna [use them]. I understand why they do it – it's so nice to think they [can have it] today and will pay for it tomorrow.”

During the interview, Buffett also noted that his attempt to launch a credit card at Geico cost him about $60 million.

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