A man cutting up credit cards © Stella, fStop, Getty Images

Thinking about closing a credit card account? Doing so can keep you from using too much credit, reduce your risk of identity theft and make keeping track of your finances easier. But it can also have a negative effect on your credit scores.

Your credit scores are based in part on how much of your available credit you actually use. When you close an account, especially one with a high credit limit, the portion of your available credit that you're using could jump, and your scores could go down as a result. In addition, if the card you're closing was the first credit card you ever got, closing the account could shorten the length of your credit history, which can also hurt your scores.

That said, tell me if this situation sounds familiar: You have to buy a dress or a suit for a friend's wedding. It's tough financially, but it's a once-in-a-lifetime occasion. So you pick out your outfit, and when you get to the cashier, he offers you a 20% discount if you sign up for the store's credit card. Plus, with the card, you get free alterations.

I've had a lot of friends get married recently.

Maybe you've been in this situation, too, and now you have too many store cards and would like to simplify your credit life a bit. Or maybe a card with an annual fee has outlasted its welcome in your wallet. In these cases, closing a card (or cards) can be an appealing notion. Here are six steps for doing it right:

No. 1: Target the card that costs you the most first

If you are going to jettison multiple cards, close just one account at a time. Closing too many cards at once can cause your credit scores to drop sharply.

To determine which card you should target first, calculate which one is costing you the most -- whether through a high annual percentage rate you're paying on the balance or a steep annual fee that's drawing nearer -- and make it your goal to close that account first. (Don't forget to factor in any rewards you get from your cards.)

No. 2: Pay the balance in full

This may seem obvious, but I've chosen to mention it so there's no confusion. Trying to close a card that still carries a balance is a terrible idea for a lot of reasons, not the least of which is the damage it will wreak on your credit. If you can't pay the balance in full, consider transferring what you owe to a card with a lower APR.

No. 3: Declare your intentions with your issuer

I always try to cancel a card over the Internet first. It avoids the sales pitch from the person on the other line when I try to cancel. But if need be, call your credit card company and stand firm when the representative tries to talk you into keeping the account open.

No. 4: Send a written confirmation of cancellation

Keep a copy of this document for your records as well. This will give you more leverage if the account appears open after your efforts to cancel it.

No. 5: Dispose of the card properly

Once you're certain that the account is closed, cut up your card and dispose of the pieces in multiple loads of trash, so a garbage raider can't reassemble it.

No. 6: Keep an eye on your credit scores

If any errors crop up, it's your responsibility to correct them. Keep tabs on your scores. It may take a few weeks for any changes to occur, but watch carefully to see if cancelling your card has a negative effect. If it does, weigh carefully whether you want to close any other accounts.

Whether you should close a credit card account can be a tough decision. Do the benefits -- which sometimes are only psychological -- outweigh the potential damage to your credit scores? That's a call only you can make. But if you've struggled with overspending in the past, it is one way to reduce your temptation and simplify your finances.

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