Debt snowball is the payoff method to choose when you've quit a payoff plan before.
It's built for momentum, not math: You attack your smallest balance first, no matter what interest rate it carries. Once that debt is gone, you roll what you were paying toward it into the next-smallest one.
You will probably pay more in interest than you would with a rate-first approach. The bet is that seeing a debt disappear quickly keeps you going for the long haul.
How to do debt snowball
- List your debts (not including your mortgage) in order of smallest to largest balance. Ignore interest rates.
- Pay the minimum on every debt each month.
- Calculate how much extra money you can devote to debt payoff.
- Put that extra cash toward your smallest debt until you pay it off — even if you are paying more interest on a different one.
- Next, take the entire amount you were paying toward it (monthly minimum, plus the additional cash) and target the next-smallest debt.
- As you knock off debts, you can put all the freed-up money toward the next one in line.
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Debt snowball example
Let’s say you have the following debts and can add an extra payment of $200 per month:
- A $1,200 hospital bill with no interest.
- A $3,000 credit card balance at 15.9% interest.
- A $5,000 credit card balance at 22.9% interest.
Pay the minimum on all balances, and add the extra $200 to the $1,200 hospital bill first, even though the credit cards are charging more in interest. The goal is to get quick wins and build momentum.
⬇️ Watch for more on how to do debt snowball and other payoff methods.
Who should use the debt snowball method?
Here's a practical test: If you've started and abandoned a debt payoff plan before — or if your smallest debt could realistically be gone within three months — the snowball is probably your method. The behavioral payoff of an early win outweighs the interest math for most people in that situation.
If you've never fallen off a payoff plan and one balance carries a rate far above the others, the avalanche is the better financial choice. It has you prioritize paying off high-interest debt first to save the most money. It just may take a while to get that win.
Debt snowball pros and cons
Weigh the benefits and drawbacks to decide if this strategy fits.
Pros
Creates early wins and each one frees up funds to add to the next debt in line.
Ideal for people who have trouble staying motivated, and need a taste of success to keep the payoff train rolling.
Cons
You'll usually pay more interest than with the debt avalanche — often a modest amount, but the gap widens when one balance carries a much higher rate.
Not ideal if your largest debt is also your highest-rate debt. In that case, snowballing means paying the most expensive balance last.
Would your credit card and personal loan balances take more than five years to pay off? If so, our advice is to look into debt relief options as an alternative.
Add 'debt snowflakes' to your snowball
“Debt snowflakes” are small daily savings. For example, cutting out one restaurant meal per week and putting what you’d spend there toward a debt payment is a snowflake. Pack that onto your growing snowball because every little bit counts.
Look for ways to free up more money
Speed up your snowball-rolling by putting more money toward debt. You could start a side hustle to earn more. You could also negotiate with service providers to spend less on bills like internet and cell phone.
A NerdWallet study found that the top two most cited debt payoff strategies for Americans who have ever had revolving credit card debt are spending less money (46%) and increasing income (35%).
Additionally, you can also try to get lower rates on your biggest debts. One option is to consolidate multiple debts into one payment with a lower rate.
- You may be able to transfer a credit card balance to a lower-rate card, or one with a 0% introductory APR.
- You could also look into a debt consolidation loan.
» Compare the best balance transfer credit cards
