Because closing a credit card can have a negative impact on one's credit score, many people are reluctant to close any cards -- ever. However, sometimes a situation will arise where keeping a card may have an even worse result than taking a small hit on your credit report.

You're overspending

Having tons of available credit can be an irresistible temptation. If there's something that you really, really want, why should you wait until you can afford to pay cash when you've got all those lovely, empty credit cards? If that line of thought sounds familiar to you, you might benefit financially from having a little less available credit to enjoy (and use). Otherwise, you could end up with a mountain of credit card debt before you even know what's happened.

Wolf in sheep's clothing

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1. It's got a high annual fee

There are zillions of credit cards out there, many of which have no annual fee whatsoever, so what's the point of hanging onto one that does? Unless you have an extremely good reason to keep that particular card (for example, you're trying to rebuild your credit and you have trouble getting approved for new cards at this point), replace it with one that won't charge you even when you're not using it.

2. It's got a high interest rate

Technically speaking, all credit cards have a high interest rate -- but some are definitely higher than others. If you're stuck with one of the really high ones, call and ask if they will give you a better rate. If they decline to assist you, shop around and see if you can get a better deal elsewhere. The credit card industry is so competitive these days that you can usually find a more attractive offer if you look. Even if you can't find a better card today, one may pop up in a few weeks or months -- so don't give up and settle for a ridiculously high interest rate.

3. You've gone through a divorce

Divorces are both messy and traumatic on a lot of levels, including financially. Most married couples set up joint accounts for everything, including their credit cards. If you've just split up with your former spouse, it's important to get your joint card canceled and replace it with one in your own name only. Otherwise, you could run into some even worse complications either now or in the future.

For example, if your former spouse has run up a lot of charges on a joint card and he disappears or goes through a bankruptcy, you might be stuck paying for said charges. For that matter, even if your divorce decree says that your spouse is responsible for the debt on a certain card, if it's a joint account, the credit card issuer can still hold you responsible if your ex-spouse doesn't come through.

4. It's getting hit with bogus charges

Let's say you've finally gotten around to canceling that gym membership that you never used, but the gym is still charging your card every month. You might, with much effort and hassle, get them to quit charging you -- but it's often much cheaper and easier just to cancel the stupid card. And if your card or card number has been outright stolen and used fraudulently, you should definitely cancel that card ASAP (notify the credit card issuer first; they will usually close the card for you as soon as you report the theft).

5. The whole picture

When deciding whether or not to close a card, don't lose sight of the forest for the trees. There are times when it's important to get your credit score as high as you possibly can -- for example, you're about to buy a house and want the best possible deal on the mortgage -- and at those times, hanging onto a problem card for a while makes sense. But if you have no immediate need for super-great credit, ditch the problem child and don't look back.