SOME CARD INFO MAY BE OUTDATED
This page includes information about these cards, currently unavailable on NerdWallet. The information has been collected by NerdWallet and has not been provided or reviewed by the card issuer.
With the debt snowball method, you pay off your debt with the smallest balance first. Once that’s paid, you roll the amount that was going toward that bill into paying off your next-smallest debt.
With this method, you still make the minimum payment on all of your debts. The key is to add whatever extra money you can spare toward the account with the smallest balance.
The amount you're able to pay toward debt grows as you close out loans. You know, like a snowball rolling down a hill that picks up more snow with every turn.
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 monthly payment for every debt.
- 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.
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.
Who should use the debt snowball method?
Consider the debt snowball method if you’re motivated by small wins. This approach can provide the early satisfaction of seeing debts wiped out one by one.
It’s mindset over math. Sure, paying down higher-interest rate debt first makes numerical sense. But going small and actually closing out loans can give you the satisfaction to keep going.
Meanwhile, the debt avalanche strategy is more about the numbers. It has you prioritize paying off high-interest debt first to save the most money. While this method can indeed save you more over time, it can take longer to get the first debt paid off.
If your unsecured consumer debts — such as credit cards and personal loans — would take more than five years to pay, consider exploring debt relief options.
Debt snowball pros and cons
As you’re thinking about whether this is the strategy for you, consider the advantages and disadvantages.
Pros
Creates early wins.
Easy to understand and track.
Works well for people who have trouble staying motivated.
Cons
You might pay more interest than with the debt avalanche.
Not ideal if you have big balances with high interest rates.
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 recent 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%), both of which could help you add cash to debt payments.
Additionally, you can try to get lower rates on larger, high-interest debts. Debt consolidation, which combines multiple debts into a single payment, usually at a lower interest rate, could be an option.
- 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
Article sources
NerdWallet writers are subject matter authorities who use primary,
trustworthy sources to inform their work, including peer-reviewed
studies, government websites, academic research and interviews with
industry experts. All content is fact-checked for accuracy, timeliness
and relevance. You can learn more about NerdWallet's high
standards for journalism by reading our
editorial guidelines.
