Reserves for credit losses represent our best estimate of the expected credit losses in our outstanding portfolio of Card Member loans and receivables as of the balance sheet date. The Current Expected Credit Loss (CECL) methodology requires us to estimate lifetime expected credit losses by incorporating historical loss experience, as well as current and future economic conditions over a reasonable and supportable period (R&S Period), which is approximately three years, beyond the balance sheet date. We make various judgments combined with historical loss experience to determine a reserve rate that is applied to the outstanding loan or receivable balance to produce a reserve for expected credit losses.

We use a combination of statistically-based models that incorporate current and future economic conditions throughout the R&S Period. The process of estimating expected credit losses is based on several key models: Probability of Default (PD), Exposure at Default (EAD), and future recoveries for each month of the R&S Period. Beyond the R&S Period, we estimate expected credit losses by immediately reverting to long-term average loss rates.

•EAD models are used to estimate the balance of an account at the time of write-off. This includes balances less expected repayments based on historical payment and revolve behavior, which vary by customer. Due to the nature of revolving loan portfolios, the EAD models are complex and involve assumptions regarding the relationship between future spend and payment behaviors.

•Recovery models are used to estimate amounts that are expected to be received from Card Members after default occurs, typically as a result of collection efforts. Future recoveries are estimated taking into consideration the time of default, time elapsed since default and macroeconomic conditions.

We also estimate the likelihood and magnitude of recovery of previously written off accounts considering how long ago the account was written off and future economic conditions, even if such expected recoveries exceed expected losses. Our models are developed using historical loss experience covering the economic cycle and consider the impact of account characteristics on expected losses. This history includes the performance of loans and receivables modifications for borrowers experiencing financial difficulty, including their subsequent defaults.

Future economic conditions that are incorporated over the R&S Period include multiple macroeconomic scenarios provided to us by an independent third party. Management reviews these economic scenarios each period and assigns probability weights to each scenario, generally with a consistent initial distribution. At times, due to macroeconomic uncertainty and volatility, management may apply judgment and assign different probability weights to scenarios. These macroeconomic scenarios contain certain variables, including unemployment rates and real gross domestic product (GDP), that are significant to our models.

We also evaluate whether to include qualitative reserves to cover losses that are expected but, in our assessment, may not be adequately represented in the quantitative methods or the economic assumptions. We consider whether to adjust the quantitative reserves (higher or lower) to address possible limitations within the models or factors not included within the models, such as external conditions, emerging portfolio trends, the nature and size of the portfolio, portfolio concentrations, the volume and severity of past due accounts, or management risk actions.

Lifetime losses for most of our loans and receivables are evaluated at an appropriate level of granularity, including assessment on a pooled basis where financial assets share similar risk characteristics, such as past spend and remittance behaviors, credit bureau scores where available, delinquency status, tenure of balance outstanding, amongst others. Credit losses on accrued interest are measured and presented as part of Reserves for credit losses on the Consolidated Balance Sheets and within the Provisions for credit losses in the Consolidated Statements of Income, rather than reversing interest income.

For Other loans, we use vintage-based historical performance to estimate expected credit losses over the life of the loan, net of recovery estimates.

Loans and receivable balances are written off when we consider amounts to be uncollectible, which is generally determined by the number of days past due and is typically no later than 180 days past due for Card Member loans and receivables and 120 days past due for Other loans. Balances in bankruptcy or owed by deceased individuals are generally written off upon notification.

The following table reflects the range of macroeconomic scenario key variables available to us as of March 31, 2025 and December 31, 2024, respectively, which were used, in conjunction with other inputs, to calculate reserves for credit losses:

Table 3.1: Key Macroeconomic Variables


	U.S. Unemployment Rate		U.S. GDP Growth (Contraction) (a)
	March 31, 2025	December 31, 2024	March 31, 2025	December 31, 2024
First quarter of 2025	4%	4% - 6%	2%	4% - (3)%
Fourth quarter of 2025	3% - 8%	3% - 8%	3% - (4)%	3% - 1%
Fourth quarter of 2026	3% - 8%	3% - 7%	2%	2%
Fourth quarter of 2027	4% - 7%	3% - 6%	4% - 2%	4% - 2%

Card Member loans reserve for credit losses decreased for the three months ended March 31, 2025. Our reserves for the current period reflect the quality of our premium customer base and the assumptions about the macroeconomic outlook available to us as of quarter-end.

Card Member loans reserve for credit losses increased for the three months ended March 31, 2024, primarily driven by an increase in loans outstanding and slightly higher delinquencies.

Table 3.2: Changes in Card Member Loans Reserve for Credit Losses


	Three Months Ended March 31,
(Millions)	2025		2024
Beginning Balance	$	5,679	$	5,118
Provisions (a)	901		1,014
Net write-offs (b)
Principal	(818)		(705)
Interest and fees	(178)		(150)
Other (c)	8		(6)
Ending Balance	$	5,592	$	5,271

(a)Provisions for principal, interest and fee reserve components. Provisions for credit losses includes reserve build (release) and replenishment for net write-offs.

(b)Principal write-offs are presented less recoveries of $221 million and $159 million for the three months ended March 31, 2025 and 2024, respectively. Recoveries of interest and fees were not significant.

Card Member receivables reserve for credit losses decreased for both the three months ended March 31, 2025 and 2024, primarily driven by decreases in receivables outstanding.

Table 3.3: Changes in Card Member Receivables Reserve for Credit Losses


	Three Months Ended March 31,
(Millions)	2025		2024
Beginning Balance	$	171	$	174
Provisions (a)	146		196
Net write-offs (b)	(169)		(217)
Other (c)	—		(2)
Ending Balance	$	148	$	151

(a)Provisions for principal and fee reserve components. Provisions for credit losses includes reserve build (release) and replenishment for net write-offs.

(b)Net write-offs are presented less recoveries of $73 million and $76 million for the three months ended March 31, 2025 and 2024, respectively.

Other loans reserve for credit losses increased for both the three months ended March 31, 2025 and 2024, primarily reflecting increases in other loans outstanding as we continue to grow our Personal Loans and Business Line of Credit offerings.

Table 3.4: Changes in Other Loans Reserve for Credit Losses


	Three Months Ended March 31,
(Millions)	2025		2024
Beginning Balance	$	194	$	126
Provisions (a)	105		53
Net write-offs (b)
Principal	(53)		(42)
Interest and Fees	(2)		(1)
Other	—		—
Ending Balance	$	244	$	136

(a)Provisions for principal, interest and fee reserve components. Provisions for credit losses includes reserve build (release) and replenishment for net write-offs.

(b)Principal write-offs are presented less recoveries of $7 million and $4 million for the three months ended March 31, 2025 and 2024, respectively. Recoveries of interest and fees were not significant.