Credit cards are an incredibly powerful financial tool. They can help you build credit, earn rewards and even check off that bucket list vacation for a fraction of the cost. I’ve personally used dozens of credit cards over the years to travel the world. I’ve also canceled my fair share of cards that lost their appeal and were just not worth the annual fee.

Canceling credit cards can be integral to a good rewards strategy. Of course, you want to be thoughtful about it and make sure doing so doesn’t hurt your credit or long-term rewards goals. With that being said, here’s how to decide which credit cards to cancel and how to do it while minimizing any negative impact.

Credit cards you should consider canceling

If this has you reconsidering your current credit card strategy, that’s good! You should constantly evaluate your credit cards and make sure they’re working for you. So what exactly should you look for in a credit card? Above all, a credit card should be rewarding and in line with your financial and travel goals.

With that in mind, these are the six types of credit cards you should consider canceling:

Cards you don’t use

This goes without saying, but if you’re not using a card it might be time to drop it. Credit utilization plays an important role in your credit score, and not using a card isn’t calculated favorably. If you’re not regularly swiping your card and earning rewards, you should consider canceling it.

Cards with high annual fees

It’s not all about earning rewards either. If you have a premium credit card and are not taking advantage of its statement credits and travel perks, it might be time to cancel the card.

Credit cards with high annual fees often come with premium travel perks. Sometimes those perks aren’t quite as useful as anticipated. If you find yourself spending more to take advantage of an airline fee credit or letting credits expire, then it may be time to re-evaluate whether you need that card in your wallet.

Cards with repetitive benefits

The credit card landscape has become competitive lately, with lower annual fee cards like the Capital One Venture Rewards Credit Card  and Chase Sapphire Preferred® Card offering benefits on par with premium credit cards. If you have multiple credit cards in your wallet offering overlapping benefits such as Global Entry/TSA PreCheck credits and Priority Pass Select membership, it may be time to consider canceling one of those cards.

Why shell out hundreds of dollars in annual fees every year for benefits you could be getting cheaper elsewhere? Evaluate your current credit card line-up and determine which benefits are repetitive and which card(s) you can downgrade or drop.

Cards with benefits that are costing you

It’s easy to get caught up in the value of credit card benefits and think, “I’m getting my money’s worth!” Be honest with yourself about the value of these perks and what they’re costing you.

For example, if you’re paying more to stay at Marriott hotels to use the Bonvoy Brilliant’s up to $300 credit, then the Marriott Bonvoy Brilliant™ American Express® Card may not be as beneficial as you think. You might be better off canceling the card or switching to the Marriott Bonvoy Business® American Express® Card for practical benefits at a lower annual fee.

Cards that aren’t rewarding

Having a travel rewards card should be rewarding. Take a look at your spending over the last year and think about your upcoming purchases. Does your credit card offer meaningful bonuses in these spending categories? If not, you might be due for a change. If you’re not earning maximum rewards on your biggest spending categories, it might be time to cancel and get a different card.

For example, The Platinum Card® from American Express is one of the best cards for travel—not because the category bonuses are particularly compelling but because of the statement credits and lounge benefits offered.

If you spend a significant amount on travel every year, you might be better off with the Chase Sapphire Reserve®. The card offers 3X on general travel purchases and some of the same travel perks as the Platinum card.

The type of rewards you’re earning is just as important as the rate at which you’re earning them. If you’re no longer getting value out of your Chase Ultimate Rewards, then it might be time to switch to a card that earns one of these:

Or perhaps you’re weary of Hyatt points after the recent award charts changes. It might be time to switch to a card that earns transferable rewards, so you have more options for how you use your points.

When there are alternative cards with lower annual fees

Not all rewards credit cards are worth their annual fees, and if you can get similar benefits at a lower cost, you should explore that option. For example, people who want to earn bonus points on grocery spending often go for the American Express® Gold Card. But the card has a $250 annual fee, which may not be worthwhile if you’re not making use of its various perks.

If all you want is to earn bonus points on grocery spending, you might want to switch to the Blue Cash Preferred® Card from American Express, which earns 6 percent cash back on U.S. supermarket purchases for a much lower annual fee of $95. Amex Blue Cash does not come with travel perks, but it will save you money on groceries. If you want grocery spending categories as well as travel perks, consider the Citi Premier® Card, which also has a $95 annual fee and earns 3X points at supermarkets. Granted, the Citi Premier doesn’t earn the same rewards as the Amex Gold, but many of their transfer partners overlap.

Bottom line: It’s good to evaluate your most valued card benefit and see if there’s another credit card out there offering a similar benefit for a lower annual fee.

How canceling a card impacts your credit

If you play it right, canceling a credit card will have minimal impact on your credit. The impact of canceling a card depends largely on the account age and your overall utilization rate. If you cancel a newer card, you’ll see a temporary drop in your credit score. This change is often temporary and will recover as you practice good credit habits.

On the other hand, canceling an older card can have a negative impact in the long run. That’s because your average account age, which is responsible for about 15 percent of your credit score, will decrease. That’s why it’s always best to downgrade older credit card accounts to cheaper or no-annual-fee cards. That way, you don’t lose out on that credit history but can still reduce your annual fee or switch to a card that better suits your needs.

Alternatives to canceling a credit card

Canceling a credit card isn’t the only course of action if the card is not working for you. Downgrading your card might be a better move, especially if the card you’re looking to drop is one of your oldest accounts. This way, your credit history stays intact, and you get a card that suits your spending habits better.

For example, many people who no longer feel served by the Sapphire Preferred card will downgrade to the no-annual-fee Chase Freedom Unlimited®. They save $95 per year and earn 3 percent cash back on popular spending categories like dining and drugstores. These folks might also prefer the simplicity of a cash back card over a complicated rewards program.

Keeping a card with no annual fee is easier to justify than one with an annual fee that isn’t a good fit for your spending habits and travel goals.

If you want to cancel a card and have multiple accounts with that bank, consider allocating the credit line to another card. For example, if you have both a Chase Sapphire Reserve® and a Chase Freedom Unlimited but are looking to cancel the former, you can call up Chase and ask to move the Reserve’s credit line to the Freedom Unlimited. This way, your utilization rate won’t be impacted when you cancel the card.

Do unused credit cards affect your credit score?

Downgrading your card could be a great move, but what if you don’t use the new card much?

You might be wondering whether unused credit cards impact your credit score. The answer is yes.

Credit utilization makes up 15 percent of your credit score, and a zero-utilization rate can have a negative impact. Banks want to see that you can use credit responsibly by charging and paying your cards off on time. That’s hard to assess when you’re not using a card at all.

If you don’t use a credit card for a long time, your bank might shut it down for inactivity. If this happens to your oldest credit card, it can negatively affect your overall credit score.

An easy way to put some spending on your card and maintain a low utilization rate is to automate some monthly expenses. Charge your streaming subscription to your card and set up autopay, so you don’t forget to pay off your card. This is a great way to put minimal spending on a card without the added responsibility of tracking another account.

How to cancel a credit card

You can cancel a credit card by calling your bank and speaking with a customer service agent. Some banks even allow you to cancel through secure messages or chat conversations. I’ve had success canceling Citi cards through the secure messaging center. Meanwhile, American Express made it super easy to cancel my Marriott Bonvoy Brilliant Amex card via chat when that card lost its appeal.

The bottom line

Re-evaluating your credit cards is key to a good rewards strategy, and canceling a card can be a good move. After all, if a credit card ceases to be worthwhile, you don’t want to continue paying an annual fee or letting it take up space in your wallet. Rewards cards are supposed to be rewarding, and if they’re not, you should feel empowered to cancel or downgrade them.

Consider the account age and alternatives before giving any credit card the ax. If you decide to cancel a card, do it the right way. With these tips, you should be well-equipped to do so.