Use the CARDS Checklist to Dump Underperforming Plastic

You’ve taken a hard look at your abundance of credit cards, and some just have to go.

Maybe the annual fee isn’t worth it anymore, or your credit has improved and you qualify for lower interest rates. Or maybe your rewards card is no longer rewarding enough — because you've found a more lucrative offer or your spending habits have changed.

But getting rid of an underperforming card may not be as simple as immediately closing the account, as that could hurt your credit scores.

Instead, you can first run through a simple acronym — CARDS — to evaluate your winners and losers. It stands for "cancel, acquire, renegotiate, decommission and save."

CARDS checklist: How it works

Whatever the reason for re-evaluating your credit cards, here are choices for your next move:

Cancel

A primary reason to cancel a card is to stop paying an annual fee, but your credit scores could take a hit if you do. Scoring formulas like to see many open credit lines with unused capacity, along with a long history of on-time payments. Closing an old account hurts on all fronts, although the degree varies among individuals. Canceling a relatively new card with a low credit limit is less of a concern.

With a rewards card, cash in your points or miles before closing it and change any recurring payments billed to that card.

Acquire

If your card is too punitive with fees and interest or too skimpy on rewards, it’s time to look for alternatives. Many credit card comparison websites can help you choose a card that’s a better fit.

“If your credit score is good to excellent, there are some great offers out there,” says credit card expert Beverly Harzog, author of the book “The Debt Escape Plan.” Plus, getting a new rewards card has the added potential benefit of a sign-up bonus, often worth hundreds of dollars if you meet a minimum spending amount.

» MORE: Your next credit card: What a good offer looks like

Opening a new card can have a relatively small and temporary negative effect on your credit scores, but may help in the long run because it can add to your total available credit, a positive in the scoring models.

Renegotiate

You’ve decided to keep the card, but you’re not thrilled with it. That might be a time to negotiate features with your card issuer, especially if you’ve been a good customer and your credit has improved, Harzog says.

For example, you can ask for a lower interest rate, a higher credit limit, an upgrade to a more lucrative card within that issuer’s card family or a downgrade to a card with no annual fee.

“You have some leverage if you want to stay with your current issuer,” Harzog says. “You might be surprised at how flexible they are.”

Decommission

The card didn’t make the cut, but that doesn’t mean you should close the account unless it’s a temptation to overspend. Again, consider the potential hit to your credit scores.

Especially if the card has no annual fee, stash it in a sock drawer. Use it only occasionally so the issuer doesn’t close the account. Don’t forget to pay the bill — consider putting that card on autopay through your bank.

Save

These cards are competitive and still work in your life, earning a place in your wallet. Now’s the time to develop a strategy.

For example, you could use a rotating-categories rewards card to get 5% cash back on gas or groceries, while using a flat-rate cash-back card for everything else. While you’re optimizing, re-examine your card’s unsung benefits, such as extended warranty, price protection or car rental insurance. Traveling abroad soon? Note which of your keepers has no foreign transaction fees.

Take a bird's-eye view

Whatever you do while weeding out your credit cards, keep an eye on bigger goals for saving money and eliminating debt, while occasionally checking your credit reports on annualcreditreport.com, Harzog advises.