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Managing your credit can be quite confusing, particularly when you've got a credit card that you're just not that into anymore.

Can you cancel it? Is it better to keep it? Will canceling it hurt your credit?

Let's sort this out.

Cancellation and credit scores

Fair credit score report with pen
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Canceling a credit card could drop your credit score into the so-so range.

Your credit score is determined by a number of factors, including how much debt you have, whether you regularly pay your bills on time, and how much of your available credit you are currently using. When you open a credit card, credit reporting bureaus view this as your card issuer extending you a line of credit. People who have multiple or large lines of credit available to them are considered more trustworthy, and therefore are given higher credit scores.

This means that if you have a credit card that you rarely or never use, you pay it on time every month, and you don't carry a high balance on the card, you are probably getting a credit score bump from keeping that account open.

If you've already established substantial credit and handle your debts well, closing a single card likely won't impact your score much, if at all, and certainly not for long.

But canceling a card with a high credit limit can hurt your credit score. To protect your score, you'd need to pay off other credit card balances to offset the loss of available credit from the card you're closing.

It can be even more dangerous to your credit if you cancel a credit card you've had for years. Old credit is the best kind of credit, and having a long-standing, well-maintained line of credit looks excellent on a credit report.

Good reasons to cancel

businessman with credit card dialing phone for support
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If the card is too tempting or is costing you too much, go ahead and cancel.

It's not always a bad idea to cancel a credit card. In fact, there's plenty of reasons you might want to do it.

Not everyone is great at controlling their shopping urgest, so if dumping a credit card might stop you from spending uncontrollably, it's probably the right move.

Some cards have hefty annual fees that you have to pay regardless of whether you are using your card, and closing your card or switching to a no or low annual fee credit card is worth the hit to your credit.

What many people don't know is that you can still cancel a credit card even if it has a balance. Just contact the card issuer and ask that the account be closed so new charges can't be made. You'll be able to continue to pay the balance down.

Basically — if the card is costing you money, cancel it!

Bad reasons to cancel

If your reason is just that you don't use the card, especially if the card has a low annual fee, you are probably making a mistake by cancelling. For most people, it makes sense for your credit score to keep open any available line of credit, especially when there isn't a balance that's racking up interest.

Remember — you never know when you might need that credit, so hang onto it for a rainy day.

So, what should you do?

If you're determined to banish a credit card from your wallet and think you have good reasons, the cancellation likely won't shatter your credit score.

That said, it's always best to preserve your credit lines, to maintain a high score and have credit options at your disposal.