So you want to cancel your credit card huh? It might not always be the best course of action. Read on for the reasons…

• Your credit history:
  Your credit score (FICO) is based partly upon the length of your credit history. This means that if you cancel cards that you have had for a while it can hurt your score. What do you do instead? Just throw them in a drawer and don't use them. This of course supposes that you don't have an annual fee attached to the card (in which case you should just bite the bullet and cancel it).

•  Your credit utilization ratio:
  Another factor in determining your credit score is your credit utilization ratio. In short, how much credit do you have access to and out of that number how much are you presently using? If you have five credit cards, each with a $10,000 limit, you have $50,000 in credit. If you have a totsal balance across those five cards of $10,000, you have a 20% utilization ratio ($10,000 is 20% of $50,000). Cancel one of those cards and you now have a utilization ratio of 25% ($10,000 of $40,000)–and the bigger the ratio the lower your credit score. Again, just throw the card in a drawer.

Moral of the story is: try to just throw the cards somewhere where you won't lose them or use them. For more reasons of why having and using credit cards is actually a good thing, check out my post entitled "Credit Cards Are Good".