Credit Utilization Rate

• One important factor in determining your credit score is the amount of your outstanding balance in relation to the amount of total available credit, which is known as your credit utilization rate. For instance, if your utilization rate is 30 percent, it means that 70 percent of available credit remains unused, which is a ratio considered as favorable, according to the FICO credit card rating method. Canceling a card lowers your total amount of available credit and increases the percentage of used credit, which can lower your credit score.
  
  

Card Age

• The length of time that you've had a particular credit card also has an impact on your credit score. In general, the longer you've had a card that remains in good standing, the more favorable it is for your credit score. Closing older accounts may not help your credit score, and could actually harm it. If you feel you must start getting rid of credit cards and closing accounts, start with the ones you've had for the least amount of time.
  
  

Losing Perks

• Credit cards often come with a number of useful benefits such as rewards programs for frequent use, low-cost rental car insurance and providing cash back on purchases. By canceling a card, you'll also lose any associated membership benefits. It is a good idea to analyze any additional benefits it might offer and see how they compare to those offered by your other cards. If you decide to cancel, make sure you redeem any accumulate points if possible.
  
  

Avoiding Additional Debt

• If you have a problem with using your cards excessively and you feel that canceling them is your only way to stop using them, you can try some other methods first. Consider giving them to a trusted friend or family member to hold them for you while you pay down the balances. You can also lock them away in a place where accessibility is difficult, or cut them up without closing the account. Keep one card in your wallet to cover any financial emergencies that might occur.