Disclosure: The information we provide is precise and genuine to make your Every Buck Count. However, some of the links provided belong to our affiliate partners and we get paid for it. For more information please check out our Full Advertising Disclosure.

Canceling your credit cards could help you get your debt in control and even become debt free. But, remember that a credit card is a useful financial instrument when managed correctly. So, before you make a move, check these ten practical do’s and don’ts for canceling a credit card for you to boost your credit rating and improve your finances.

Do cancel a credit card with a huge annual fee

If you’re a holder of secured credit cards, premium credit cards or reward credit cards, you may have to pay annual fees for the benefits of using them. There are many credit cards that waive the fee in the first year. So, expect it to be automatically charged to your account afterwards.

If the rewards you’re getting from holding those cards are not worth paying the annual fee, you may have to let the card go. While there is nothing wrong in paying an annual fee to enjoy its perks, sometimes it’s just a complete waste of money especially when you’re not getting a good deal.

Do cancel credit cards when you’re relying too heavily on them for your daily expenses

Are you a credit card junkie who uses a credit card for everything? While swiping or dipping your card is more convenient than digging into your purse for cash, charging up to thousands of dollars each month on that piece of plastic isn’t practical at all.

Why pay an interest for your small ticket items, when you have money available to pay for it in cash? It won’t help you rack up rewards. It is also important to close credit cards when you have a tendency to overspend. You have the tendency to spend too much when you always end up spending more than you planned, whether it’s when you walk into a store, or you order online. If you’re overstretching your credit, you may end up with big balances, lower credit score and a huge amount of debt.

Do cancel joint credit card accounts when you’re going through a divorce

Talk to your credit card provider about it. You can apply for your own account, and make sure that your spouse can’t access it. Otherwise, the credit card issuer will still count on both of you to pay off the debts on the card. So, while your divorce may eventually dissolve your marriage, it won’t dissolve the debts at all. Save yourself from the stress of paying for your ex’s debts by canceling it while your divorce is being processed.

Do close a recently opened credit card when it caused you to lose track of your credit accounts and miss payments

It is advisable to maintain just one to two accounts with lower interest and charges, than having multiple cards that you can’t pay on time. Why pay for interests on additional cards that would just ruin your credit rating?

Do cancel credit cards when you consolidate debts

Trouncing multiple credit card bills are really painful and confusing, especially if you have missed several payments already.

If you can’t negotiate lower interest rates for your credit card and you can’t afford high monthly payments anymore, you may consider debt consolidation. It allows you to make automatic payments each month and helps you pay off all your credit card debts and walk away debt-free. But, you have to cancel those credit cards so you won’t be tempted to use those cards again after they have been paid off. It is also important to change the spending habits that got you into a financial mess in the first place. Otherwise, you’ll be digging your debt hole thrice as deep, with the interests of the consolidation loan and the new charges you’ll make on those credit cards.

Don’t cancel your oldest credit card

The older the account, the better the credit score. Closing the oldest card will automatically shorten your credit history which makes up 15 percent of your credit rating. Doing so also shrinks your available credit and affects your credit utilization ratio. It would look like you’re spending more than you used to do, because of the lowered credit limit.

Don’t close a credit card with a balance

The total available credit and credit limit of a closed credit card is zero. So, if you still have $1 balance on that credit card, it would appear that it is maxed out and it could harm your credit standing. Remember that it is important to keep your balances lower than 30 percent of your available credit limit to maintain a good credit score. Plus, your credit issuer may increase your interest rate as a penalty for closing it without paying off the remaining amount you owe on that card.

Don’t close all your credit cards

Credit mix makes up 10 percent of your FICO score. Credit providers favor consumers who can handle a variety of loans. Having one or two credit card accounts with low balances and updated payments allows you to build a good credit history. As a result, you can also earn rewards and cash backs on your purchases, get cheaper insurance and get approved for loans with lower interest rates. Not to mention the convenience of having credit cards when going places or when you simply run out of cash at times you need it most.

Don’t close low-interest credit cards with favorable terms

Why close a card when it is not causing you problems? If you use it in the right manner, your credits card could give you reward points like free hotel bookings or free flights. There are also many establishments giving cashback offerings and freebies when you pay using your credit card.

Check the features of a card to ensure that it is meeting your specific needs. If you have a damaged or limited credit, ask yourself if keeping your card could help you improve your credit. Does it help you save money on interest? Do you earn rewards as you use it? If the answer is ‘yes’ to these three questions, then the card is worth keeping. A good example is a low-interest, zero APR balance transfer card that you can use to save money on interests and to pay off debts faster.

Don’t cancel credit cards when you’re still new to using loans and lines of credit

If you are not drowning in debt, you still make payments on time and you have no defaults, there is no reason to close your accounts that do not charge an annual fee. Unless you are an overspender, keeping your credit cards could help you establish a good credit rating, as long as you manage it well.

If you don’t want to charge anything on a card, just keep it open and destroy the card. That way, your credit age will continue, and you get to maintain your available credit limit. But, you have to make minimum charges on the account at least once a year. Otherwise, your credit card issuer may close it for inactivity.

You might want to enjoy the perks of not using credit cards at all, such as peace of mind and zero debts. But, that piece of plastic is an integral and powerful financial tool in today’s society. The key is finding the right balance when it comes to managing credit card debts. Be vigilant, responsible and exercise self-control at all times.