Banks Face Mountain of Plastic

Capital One, based in McLean, Va., expects U.S. card charge-offs in the range of 6% through the end of September and higher in the fourth quarter, it said last month during earnings. The company said that it is pulling back on loan growth as industry trends and economic indicators weaken.

While an extended recession will put a damper on just about any consumer-related company, electronic payment processors such as Visa(V - Cramer's Take - Stockpickr) and MasterCard(MA - Cramer's Take - Stockpickr) are in good positions. That's because the companies take in fees per card transaction and don't hold loans on their books like the banks or other card companies like American Express(AXP - Cramer's Take - Stockpickr) and Discover Financial(DFS - Cramer's Take - Stockpickr). The firms are also expanding their businesses outside of the U.S., which for the most part are still cash and check societies.

Consumers having trouble accessing cash through home equity lines as the credit crisis continues will be more apt to finance the purchases through their credit cards, analysts say.

Visa has acknowledged that its U.S. credit card business has slowed somewhat, but that the company's international and debit card businesses largely offsets the decline. The company has "a pretty high degree of resiliency," CEO Joseph Saunders said on Wednesday at the UBS conference. "When the economy weakens, as it has, we won't fall off a cliff - not even a little ledge."