Q. I have a credit card with a $95 annual fee. I’m trying to decide if I should cancel or if it will hurt my credit report. What do you think?
— Cutting back

A. Egads, you still have a credit card that charges an annual fee?

Cards with annual fees are sometimes no different from cards that don’t charge. Others say it’s worth the cost because of special benefits or rewards.

Without knowing the exact card you’re talking about or your shopping patterns, it’s impossible to say whether this card is worth the fee.

But will it hurt your credit? Absolutely yes, especially if you have balances on your other cards.

That’s because canceling the card will show that you have less credit available to you, said Bill Connington of Connington Wealth Management in Paramus.

That’s because part of your credit score includes something called your credit utilization ratio, or debt usage ratio, which looks at how much of your available credit you’re using. So if you have $30,000 of available credit and you have balances worth $10,000, that’s not awful. But if you cancel a card that has a $10,000 credit limit, your $10,000 balance is now equal to half of your available credit.

That’s not so good.

Your best bet would be to call your credit card company and ask that the annual fee be waived, Connington said.

“If this doesn’t work, then you can try letting them know you want to cancel the card,” he said. “They may offer you benefits equal to the annual fee, downgrade your card to one without an annual fee but may have less rewards, or let you use the rewards you have to pay your annual fee.”

Connington said you should give it a try before canceling the card.

“Go with the old adage that it doesn’t hurt to ask,” he said.

Email your questions to ask@njmoneyhelp.com.

Karin Price Mueller writes the Bamboozled column for The Star-Ledger and she’s the founder of NJMoneyHelp.com. Click here to sign up for the NJMoneyHelp.com weekly e-newsletter. Like NJMoneyHelp.com on Facebook and follow it on Twitter

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