by: Debbie Dragon

As the economy continues to struggle, and President Obama continues to push for new credit card legislation, many Americans are committing themselves to paying off credit card debt. What many do once a card is paid off though, is to cancel the account completely to avoid getting into debt again. While it's a reasonably good idea for debt management (particularly if you are someone who has trouble resisting the temptation to use a credit card when it's in your wallet!)Sometimes though, canceling credit cards is not in your best interest – if you take into consideration the fact that closing credit cards lowers your available credit and increases your debt utilization percentage and may negatively affect your credit score, that is. Here are some credit cards that you are probably better off keeping active (even if you don't use them) instead of canceling them:

Credit Card With the Lowest Interest Rate: even if you plan to stop using credit cards and switch to a cash-based financial situation, you should keep your credit card with the lowest interest rate open. You just never know when you may need access to additional funds and if you need to use a credit card, you want one with the lowest possible interest rate.

Credit Card With Your Best Payment History and/or Longest History: Your FICO score is calculated based on a number of factors. 35% of your score depends on your payment history. If you have a credit card that you have always made your payments on time, you may want to keep that card open and active by charging a small amount every few months and paying it off. This is true also with a credit card that you have the longest account history with. The length of time you've had credit makes up 15% of your FICO score calculation – so if you go and cancel accounts you've had for years and only keep a recent account open – you'll see your credit score drop because you've shortened your credit history.

Your Primary Bank Credit or Debit Card: if you have a credit or debit card through the bank which you hold your main checking and savings accounts with, you probably want to keep it open. Chances are, your checking account relies on this card as the overdraft protection, and you don't want to eliminate that if you can avoid it. Many debit cards through banks are offering rewards programs now, at no cost – so it may be worth looking into the features of the program and trying to use your debit card more often to take advantage of it.

Credit Card with the Highest Credit Limit: another credit card you might consider keeping open instead of canceling is the card that offers the highest credit limit. Hopefully this card is also the one with the lowest interest or best payment history, but the idea is if you keep your highest credit limit card open even after it's paid off, you'll have a lower debt utilization percentage. It means you are using less of your available credit and that will help keep your FICO score higher than if you closed your highest credit limit account and reduced your available credit.

It's common for individuals who have had credit card debt for awhile to want to close all of their credit card accounts the moment they are paid off. Unfortunately, closing accounts can have an adverse affect on your FICO score and actually cause you more problems down the road if you should need credit in the future. It's better to learn responsible credit card use; or simply keep some of the accounts open and not use them than it is to cancel all of your credit cards.

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