By Dan Freed

(Reuters) - George Morris, a web consultant from Boulder, Colorado, has been a Wells Fargo & Co. (>> Wells Fargo & Co) banking customer for nearly 15 years, but when he needed a new credit card recently he picked Capital One Financial Corp (>> Capital One Financial Corp.).

Morris said he was put off by what he called a "rat's nest" of offerings on Wells Fargo's website.

Consumers like Morris are a problem for Wells, which is far behind rivals in building up its credit card business. The bank said on Wednesday that it had just $32.3 billion in credit loans outstanding at the end of September, representing less than 4 percent of its total loans.

At JPMorgan (>> JPMorgan Chase & Co.), in contrast, credit cards represented 16 percent of loans at the end of September, and at Bank of America Corp, (>> Bank of America Corp) they were 10 percent.

Wells Fargo hopes to boost its business to improve its profitability - it may double the loans it has on its books in the coming years, Chief Financial Officer John Shrewsberry told Reuters.

But to achieve its growth goals, Wells Fargo will have to be a little less like its usual self, Shrewsberry said.

The fourth largest U.S. bank has long prided itself on selling more products to its customers than any of its rivals, a business practice known as "cross selling" that few lenders can do successfully. The bank's skill in cross selling has made it one of the most profitable of the major U.S. banks, and the most valuable in terms of market valuation in the world.

But cross selling won't help Wells Fargo build up its credit card business from here, because it already has sold cards to so many of its customers: 43 percent of the more than 22 million households that are Wells Fargo retail banking customers have credit cards from the bank. Getting much higher than that - winning customers like George Morris, for example, will not be easy.

The bank instead plans to target new customers, which is risky because it knows less about them than those who, for example, have their paychecks directly deposited in their Wells Fargo checking account.

Credit card loans can bring big headaches to banks because they are not usually collateralized and can head south fast when the economy slows down. Bank of America saw that first hand when it bought MBNA Corp in 2006 and ramped up its credit card portfolio by 24 percent by the end of 2008. By the end of 2009, it had to set aside more than $25 billion to cover loan losses.

"We'll take - as we have been - a very slow approach so we can get it right from a risk perspective," Shrewsberry said.

Like most banks, Wells Fargo is struggling to increase profits during a long period of low interest rates, which has reduced the profitability of lending. The bank said its lending margins fell 0.1 percentage point to 2.96 percent in the third quarter.

Credit card loans can be among the most profitable consumer loans. Citigroup (>> Citigroup Inc), for example, earns a 3 percent return on the credit card loans it makes, three times the average for the entire bank, according to estimates from Bernstein Research. As the U.S. economy recovers, defaults have been low and banks can still charge high rates for these loans.

But while growing the business is not easy, Wells Fargo has been doing so. The bank on Wednesday said that in the third quarter its credit card loan book grew by 4 percent from the second quarter. If the bank can maintain that pace, the business could double in under five years.

Wells has shown a willingness to test strategies that other banks have shied away from, such as offering mortgage customers the ability to apply credit card rebates to pay down home loans. It has tried issuing American Express cards. The bank was also said to be especially aggressive in bidding on a partnership with department store chain Dillard's Inc (>> Dillard's, Inc.), according to an analyst. Wells eventually won the deal.

The bank recognizes that the current low level of defaults will not last forever, but believes that future losses will not overwhelm profit on the loans it is making now.

"We wouldn't be pursuing it if we didn't feel that through-the-cycle returns made sense," Shrewsberry said.

(Reporting by Dan Freed; Editing by Dan Wilchins and Leslie Adler)