NEW YORK (TheStreet) - Capital One's (COF) - Get Report credit card portfolio increased from $18.4 billion in 2007 to $19.6 billion in 2008 at a growth rate of 6.5%.

The acquisition on Chevy Chase Bank in 2009 further led to an increase in the average loans outstanding by 6% to $20.8 billion. We expect Capital One to continue to grow its credit card balance albeit at a slower rate, given the strong impact of recession on consumer behavior.

Capital One competes with

JP Morgan

(JPM) - Get Report

,

Bank of America

(BAC) - Get Report

,

Citigroup

(C) - Get Report

and

American Express

(AXP) - Get Report

in the credit card business.

While we expect Capital One's credit card loan outstanding will reach $24 billion by 2013, Trefis members project a level of $28 billion, suggesting a slight upside to our price estimate for COF stock.

We currently have a Trefis price estimate of $50.53 for Capital One's stock, about 23% above the current market price.

Recession's Impact on Consumer Spending Unclear

While reports surrounding holiday spending have generally been upbeat, many macro concerns remain such as elevated unemployment and a tepid economic recovery. This could weigh on confidence regarding credit card spending.

Earlier this year, in a survey by the Federal Reserve Bank of Boston in January 2010, nearly 45% of respondents said their unpaid credit card balances had declined in the past 12 months. Only 26% said it had risen over the same period. This trend may negatively impact average gross credit card balance during the Trefis forecast period.

However, the impact of the recession is mixed, with the recent trends showing positive spending results. According to MasterCard Advisors'

SpendingPulse

, which tracks spending on all transactions including cash, spending is up in all retail categories compared with last year.

Online sales showed the greatest increase, 13%, from the same period last year.

Another reason why holiday sales are increasing is that consumers have more savings. According to the U.S. Bureau of Economic Analysis, disposable personal income in the third quarter of 2010 rose 3.4% over the year before, to $11.4 trillion. We believe going into 2011 will give a clearer trend on consumer spending as well as outstanding loans.

Congress passed the Card Accountability Responsibility and Disclosure (CARD) Act in 2009 which aims to establish fair and transparent practices relating to the extension of credit under an open end consumer credit plan.

The legislation requires cardholders be protected against arbitrary interest rate increases, due date gimmicks, and misleading terms, and that credit card companies should fairly credit and allocate payments and not impose excessive fees on cardholders.

We believe this move will increase transparency between consumers and credit card companies and boost consumer confidence in spending. We expect this move will benefit companies like Capital One and may lead to a potential increase in loan balances.

Member Forecast

The Trefis community projects total credit card balances outstanding will increase from $23 billion in 2011 to $37 billion by 2013, compared to the baseline Trefis estimate of an increase from $21 billion to $24 billion during the same time period.

Our complete analysis for Capital One's stock is

here

. Link:

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This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.