If you're like most people, you have several credit cards in your wallet. The Government Accountability Office reported that 82% of U.S. adults have at least one card, but many carry three or four credit cards.

Credit cards can be convenient, but even the best credit cards can be risky. Carrying too many cards can tempt you to overspend and rack up high-interest debt. Some cards have sky-high annual or maintenance fees that you have to pay even if you never use the card.

A credit card cancellation letter can help you close your card if you're trying to limit the risk of credit card debt or avoid unnecessary fees.

When it makes sense to close a credit card

You may want to close a credit card account for several reasons. For example:

• You're entering into a debt management plan: If you enter into a debt management plan with a non-profit credit counseling agency, you typically must agree to surrender and close all of your existing credit accounts. You must wait to open a new card before your existing debt is paid in full and the debt management plan completed.

• Your card has a high annual fee: Many cards have annual fees, particularly luxury cards and those geared toward users with poor credit. If you have a card that you don't use often and that has a high annual fee, canceling it can help you save money over time.

• Available credit tempts you to spend: When you have access to a revolving line of credit like a credit card, it can be tempting to use. If you use your card to buy items or services outside your budget, canceling the card may help you control your spending.

When to think twice about closing your card

Although there are advantages to closing a credit card, it's important to weigh the drawbacks against the benefits. Closing a credit card account can affect you in the following ways:

• It lowers your available credit: Your credit utilization — how much of your available credit lines you use — makes up about 30% of your FICO credit score. If you close your credit card, you'll no longer be able to count that card's credit limit in your credit utilization calculation. As a result, your credit utilization may increase, and your credit score may drop.

• It affects your credit age: If you close your oldest credit account, you may shorten the average age of your credit accounts. With a shorter credit history, your credit may not be as strong as it was.

• You may not have access to credit in an emergency: When closing a card, you lose access to that credit line. If you max out your other cards or don't have any other form of credit, you could be left scrambling to cover unexpected expenses.

Steps to take before closing your card

If you decide that closing your account makes sense, take these steps before moving forward:

• Build an emergency fund: When you close your account, you'll need to cover unexpected emergencies via other means, such as the cash in your savings account. Building an emergency fund with at least $500 or $1,000 can give you a financial cushion and minimize the need for credit.

• Use your rewards: Most credit card companies will cancel your rewards when you close your account. Make sure you redeem any rewards before closing your account to avoid losing them.

• Pay off your remaining balance: Most cards require you to pay off your existing balance in full before they will allow you to close the account.

• Update your autopay information: Update your autopay information to another credit card or your checking account for subscriptions, utility bills and other services linked to the card. Otherwise, you risk missing a payment and incurring late fees.

• Review your credit card agreement: Your credit card agreement will outline what steps you need to take to close your account. Some companies allow you to cancel an account online, while others require written notifications, so review the requirements carefully.

Example credit card cancellation letter

When writing a credit card cancellation letter, the letter should include the following information:

• Your full name

• Your credit card account number

• Your mailing address and contact information

• Your reason for closing the account

Your credit card agreement should tell you where to send the letter, or you can look up the mailing address on your card issuer's website. Generally, it's best to send the letter via certified mail to ensure it reaches its destination and you have proof it arrived.

What's next

Once you've received confirmation that the account is closed, cut up your existing card before throwing it away. Then, check your credit reports at AnnualCreditReport.com to ensure the account is closed. It can take weeks or even months for your credit reports to update, so check once a month for the next few months to ensure it's changed.

Once your card is fully closed and the closure reported to the credit bureaus, focus on boosting your credit by keeping your other credit card balances low and making all of your payments on time.

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