It is commonly thought that, especially when it comes to a card you’ve had for a long time, you should not close the account.  That’s because credit history counts for about 15 percent of your credit score.  Close the account, the thinking goes, and you’ll erase some valuable history.  But not so fast.  According to a helpful story on Money Magazine’s More Money blog, closing an account will not wipe out the account’s history.  A spokesperson for Fair Isaac Corporation, the organization that determines your credit score, explained that after you close an account the credit agencies continue to maintain positive information about the account for about ten years and negative information for about seven years.

However, there is a way that canceling a card may hurt you.  It has to do with what’s known as credit utilization.  That’s the percentage of available credit you are using at any given time.  A lower credit utilization works to your favor.  By closing an account, you will lower your total available credit, which will likely leave you with a higher credit utilization.  If you only use five percent of your available credit at any given time and closing an account will push that to ten percent, you probably don’t have anything to worry about.  Using 10 percent or less of your available credit is ideal; 30 percent is usually seen as okay.

So, when thinking about closing an account, you don’t need to worry about its impact on your credit history.  But you should give some thought to its impact on your credit utilization.

Almost half of today’s workers say they are “not too” or “not at all” confident about having enough money to live comfortably throughout their retirement years.  And no wonder.  Nearly half of all workers age 55 and older have less than $50,000 saved for retirement, and 27 percent of all workers have less than $1,000 set aside for their later years.

One relatively simple step that encourages people to save more is to run a retirement needs calculation.  However, less than half of today’s workers have done so. One of my favorite calculators for getting a quick estimate of your retirement needs is Fidelity’s myPlan Snapshot.

Here’s what I mean.  Let’s say you have a $2,000 balance on a credit card.  If you stop using your card and make the required minimum monthly payments, those required amounts will decline a little bit each month.  No, that isn’t due to the generosity of the credit card company; it’s due to simple math.  Your minimum payment is based on a percentage of your balance.  If your balance is declining a little bit each month, your minimum required payment will decline a little bit as well – so little, in fact, that you may not even notice.  Paying this declining minimum is what keeps you in debt for approximately… forever!

For example, let’s say the card on which you have that $2,000 balance charges 18 percent interest and requires a minimum monthly payment of 2 percent of your balance ($40 this month).  If you make the declining minimum payment each month it’ll take you over 24 years to pay off that debt and it’ll cost you $4,400 in interest.

But if you can afford to pay $40 this month, you can probably afford to keep paying that amount every month.  By fixing your payment at $40, you will be out of debt in just under 8 years and you’ll pay $1,700 in interest.  Taking that simple step cut your payoff time by 16 years and your interest charges by $2,700 (You can run some declining minimum vs. fixed minimum scenarios here).

Of course, 8 years is still a long time, so it makes sense to add an extra amount to the fixed minimum.  In the example above, if you double your fixed payment to $80 per month, you’ll be out of debt in less than 3 years.  With this calculator, you can enter all of your debts and see how much faster you’ll be out of debt by adding various amounts to your fixed minimums.

The easiest step you can take toward fixing your debt problem is to fix your monthly payments.

Used responsibly, credit cards can work in your favor.  The responsible use of a credit card involves three steps.

1. Only charge pre-planned budgeted amounts.  If you have a budget that allows you to spend $75 on clothing this month, you can charge $75 worth of clothing.
2. Track your use of your card as you make purchases.  If you use budget software like Quicken or an online tool like Mint.com, your credit card transactions will be reflected in your budget within a couple days of each charge.  This is an important step that is often missed by people who either don’t track their spending or do so with a manual system like a paper & pencil budget or an Excel spreadsheet.  If you don’t track your use of your card as you make purchases, the monthly bill often seems surprisingly high.
3. Pay the balance in full each month.

If you follow these three steps you can take advantage of numerous credit card benefits, many of which were highlighted in a recent MSN story.  Among them:

Purchase protection. When I make a purchase with either of my cards, if the item is stolen or accidentally damaged within 90 days the card companies will reimburse me for up to $1,000.

Price Protection. With one of my cards, if I find the same item for a lower price within 60 days of purchase, I will be reimbursed for the difference.

Extended warranty. Both of my cards double the manufacturer’s warranty on many purchases for up to one additional year.

Car rental insurance. Before renting a car, it’s a good idea to check the terms of the insurance policy on the vehicle you own and also the terms of your credit cards. Our agent told me that for the most part the same coverage that applies to the vehicle we own applies to a vehicle we rent. The one exception is that if we’re in an accident with a rental car, the rental car company will charge a daily rental fee for every day the car is being repaired (“loss of use”), which would not be covered.

I then checked with our two credit card companies. Both offer free “secondary” insurance, assuming you use their card to pay for the rental and decline the rental company’s coverage. Secondary insurance covers anything not covered by the insurance policy on the vehicle we own, such as the deductible. However, loss of use turns out to be a gray area.  One card company rep said technically they do cover that, but only if the rental car company provides adequate documentation, which it rarely does (how’s that for an honest answer?).

Neither credit card company covers pick-up trucks or full-sized vans. One does not cover full-size SUVs.  One company provides coverage for rentals lasting up to 15 days, the other for 30 days.  Both companies provide coverage for rentals from most rental agencies, but this was not always the case, so it’s especially important to make sure your card will cover a rental from the agency you are considering.  If traveling overseas, one of our cards will not cover rentals in three countries; the other offers no coverage in six countries.

Other benefits mentioned by MSN include discounted roadside assistance and insurance for lost or damaged luggage.  Here are a couple of other credit card perks.

Discounts. You may be accustomed to looking for coupon codes and searching for other discounts on the web.  Did you know that credit card companies offer their own discounts for various merchants?  Here are the programs offered by Visa, MasterCard, and American Express.

Faith-based rewards. In an unapologetic mention of my primary sponsor, Christian Community Credit Union (CCCU), not only do their credit cards provide points that can be redeemed for travel or merchandise, but every time you use one of their cards CCCU also makes a donation to various Christian ministries.  To date, that amount has totaled nearly $3 million dollars.

Freebies. Of course, this is the benefit most people are familiar with.  While many credit card companies are becoming stingier with their reward programs, we recently got a new camcorder with a retail price of over $500 just by using points.

Bottom line?  There are financial advantages available to those who use credit cards responsibly.  Do you know about the various perks available from your credit card company?

“It makes everything taste better to be thankful,” Anna said. “You know, it’s a game an old preacher taught me to play. It’s about looking for things to be thankful for. Like one day I was walking to the store to buy a loaf of bread. I look in all the windows. There are so many pretty clothes.”

“But Anna, you can’t afford to buy any of them!” he interjected.

“Oh, I know, but I can play dolls with them. I can imagine your mom and sister all dressed up in them and I’m thankful. Much obliged, dear Lord, for playing in an old lady’s mind.”

Many years later, when Anna was dying, Oursler remembered standing by her bedside.  Deep in pain, her old hands were knotted together in a desperate clutch. “Poor old woman,” he thought. “What had she to be thankful for now?”  Just then, she opened her eyes and looked at him and said, “Much obliged, dear Lord, for such fine friends.”

Being thankful is not about painting on a smile no matter what we’re going through.  According to the Reverend Dr. John Westerhoff, who tells Anna’s story in a booklet called “Grateful and Generous Hearts,” we can all learn much from Anna, who viewed life as a gift. “Taking nothing for granted, demanding nothing as her due, she recognized that we come into this world with nothing, we go out with nothing, and in between we are given all we have.”

While the busyness and responsibilities of our lives can easily obstruct our view, none of us has to look very far to find a reason to be thankful. Living with an attitude of thankfulness is honoring to God, good for the soul, and infectious.  What are you thankful for?  Try making a list of ten things—the first ten that come to mind.  Then give Anna’s prayer a try: “Much obliged, dear Lord.  Much Obliged.”

“Be cheerful no matter what; pray all the time; thank God no matter what happens.  This is the way God wants you who belong to Christ Jesus to live.” – 1 Thessalonians 5:18 (MSG)