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I’ve been using credit cards for a long time, and my go-to credit cards have changed quite a bit over the years. But there’s one common consumer behavior that many people are surprised that I’ve never done, and that’s canceling a credit card and closing my account.

There are a few reasons why I haven’t closed any of my cards. For one thing, I only have a few with annual fees, and I don’t see any real reason to cancel no annual fee cards. And as I’ll discuss here, canceling a credit card can have an adverse impact on your FICO® Score, and I’ve generally made a point to avoid any negative credit behavior.

Just to clarify

When I say I’ve never closed a credit card account, I’m not talking about cards I’ve canceled due to fraud. I’ve had my credit card information stolen and I’ve lost a card and had to cancel it and get a new one.

It’s true that I’ve never picked up the phone and closed a credit card account entirely. However, that doesn’t mean that I’ve never had an account closed due to inactivity.

In many cases, banks monitor account activity and decide to cancel unused credit card accounts. In my adult lifetime, I’ve had about a half-dozen credit cards closed simply because I didn’t use them often enough to make the bank happy.

Sometimes you’ll get a notice that says something to the effect of “unless you use your credit card within 30 days of this letter, your account will be canceled for inactivity.” But in other cases, the bank will simply close your credit card account and let you know afterwards. This is more common with no annual fee credit cards — after all, many banks are happy to let you continue to pay a fee for a card you aren’t using.

Canceling a credit card can hurt your score — in a few ways

It might seem counterintuitive, but getting rid of a credit card — especially one that you don’t use regularly — can cause your credit score to drop. To be clear, it isn’t likely to trigger a major plunge, but it can certainly make a difference.

The short explanation is that canceling a credit card affects several areas of the FICO credit scoring formula.

First, and most importantly, 30% of your FICO® Score is based on the “amounts you owe.” This includes your credit card balances relative to your total credit limit, a concept known as your credit utilization ratio.

Here’s why it matters. Let’s say that you have one credit card with a $1,000 balance and a $4,000 limit, and another credit card with no balance and a $1,000 limit. Currently, you’re using 20% of your available credit ($1,000 out of $5,000 in total limits). But if you were to cancel the smaller, unused credit line, your credit utilization would immediately jump to 25%.

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In addition, 15% of your credit score comes from the length of your credit history. This category considers several time-related factors, including the average age of your open accounts and the ages of your individual credit accounts. Closing a credit card (especially one you’ve had for a while) can hurt you here. In a nutshell, the FICO formula rewards you for letting your accounts age.

Should you cancel your old credit cards?

Of course, like any personal finance decision, what works for one person doesn’t necessarily work for someone else. There are certainly some good reasons to cancel credit cards.

For example, if you have a travel credit card with an annual fee, and you don’t feel like you’re getting enough value from it, it can be smart to cancel. In situations like this, it can also make sense to downgrade to a lower-fee card from the same issuer so you won’t have a closed account on your credit report.

It can also make sense to cancel a credit card if you find you have too many cards open to effectively keep track of, or if the account terms or benefits change in a way that makes the card undesirable to you.

But the key takeaway is that there are drawbacks of canceling a credit card, so keep those in mind before you do.

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