American Express (NYSE: AXP) shares took a bit of a beating last week, dropping over 10% as financial stocks turned in one bad earnings report after another over the course of the week. The stock lost another 0.42% today as investors braced for more bad news from the financial sector as the nation's third-largest credit card company was scheduled to announce its third quarter earnings after the closing bell.

But the company delivered a positive surprise, sending shares up as much as 3% in after hours trading. Increased spending by American Express' consumer and corporate clients boosted quarterly profit up 10% to $0.90 per share, surpassing Wall Street expectations of $0.86 per share. The company's revenue climbed 11% to $6.945 billion, which is a touch shy of analysts' estimates of $7.27 billion. Nevertheless, the report is viewed as positive by investors concerned that American Express would also fall victim to the credit woes that have weighed heavily on companies like Bank of America (NYSE: BAC) and Citigroup (NYSE: C), which reported higher loss ratios in their credit card businesses last week.

Delinquencies edged higher year-over-year, but were in-line with the previous quarter's performance. American Express has dodged some of the credit problems other financials are facing now due to the company's focus on a wealthier, more reliable customer base.

A large portion of the company's revenues come from fees charged to merchants for transactions, called the "discount rate." American Express CFO Daniel Henry noted that the company may cut its discount rate, which is currently 2.5%, due to competition from other major credit cards. Visa and MasterCard (NYSE: MA) charge approximately 2%, which puts some pressure on American Express, as many merchants refuse to accept these charge cards because of the higher fees. More merchants accepting the cards could potentially offset losses from cutting the discount rate, if the company is forced to go that route.

The company remains "cautious" on the economy, and increased its provisioning for potential loan losses by 25 percent to $982 million, but Henry is confident that the company is better positioned than its competitors due to its more affluent customer base.

Meg Massie is an options analyst and writer at Investors Observer. DISCLOSURE: At publication time, Meg is long AXP.