Editor's note - You can trust the integrity of our balanced, independent financial advice. We may, however, receive compensation from the issuers of some products mentioned in this article. Opinions are the author's alone, and this content has not been provided by, reviewed, approved or endorsed by any advertiser.
A step-by-step guide to using the debt snowball to get out of and stay out of debt. Our guide also covers which debt to pay off first and the debt avalanche.

Welcome to our series on crushing your credit card debt. In this third of five articles, we look at how to supercharge your get out of debt program with the Debt Snowball.

We’ll cut right to the chase: using the debt snowball method can save you thousands of dollars in interest payments. On top of that, it can also significantly reduce the time it takes you to get out of credit card debt.

The debt snowball is a method for paying down any debt–not just credit cards–and it’s extremely easy to use. Let’s take a look at how it works.

What is the Debt Snowball?

The concept behind the debt snowball is really simple. You’ll focus on one debt at a time until it’s paid off. Once you close out that first balance, you’ll “snowball” the amount you were paying into the payment for the next debt in line.

There are a few steps to follow to get the ball rolling, though (pun intended).

Step 1. Figure Out Your Total Debt

Before you can determine where your debt snowball should focus–and what you can expect from the process–you need to know where you stand.

First, make a list of all of your credit card debts. You can include other debts as well, such as school loans, auto loans, and home equity loans. The goal is to get all your balances in one place, where you can see your total debt. If you don’t have a comprehensive list of all your debts, check your credit report. It should include any debts with an outstanding balance.

Step 2: Figure Out the Specifics

For each debt, you’ll then want to figure out the specifics of the account. You should list the creditor, the outstanding balance to date, the monthly minimum payment, and the current interest rate. If you’re paying an introductory rate on the debt that will change after a certain time period, write that down, too.

Step 3: Figure Out What You HAVE to Pay

Even though you’ll focus on one account at a time with the debt snowball, you can’t simply neglect the others. Each debt will have its own unique minimum monthly payment. This amount is due each and every month in order to keep the account in good standing.

You’ll want to add up the minimum monthly payments due across all of your accounts. You will continue to pay at least this amount until all of your debts are paid in full. That means that when the first debt is paid in full, you’ll take the money you were paying toward that debt and focus it toward the next debt. For all other accounts, continue paying the minimum monthly due.

Step 4: Order Your Debts

The classic debt snowball order is to pay off your lowest-balance debt first. Start with the lowest balance and work your way up. This is a psychologically effective method because it gives you a few quick wins up front. In fact, some research shows that this option gets people to stick with their debt repayment plan for longer.

The other method of ordering your debts is known as the debt avalanche. This has you start with your highest-interest debt first. This plan saves you more money over time, since you knock out the debts with the heftiest interest first. But this may mean it takes longer to pay off the first debt on your list.

Either method can work well as long as you stick to it. But the key is to tackle your debts with a plan, and to always know which debt you’re planning to pay off next.

Step 5: Put Extra Money into the Snowball

If you have any extra money to put towards paying off your debts, add that to the minimum payment on the first debt each month. Once that debt is paid off, put both your extra money and the original debt’s previous minimum payment towards the next debt. This way your payments snowball, building momentum as you pay off each debt.

Why Does it Work?

Two things make the debt snowball a powerful tool. First, the minimum payment on a credit card goes down as the balance goes down. Most credit cards calculate the minimum payment as a percentage of the outstanding balance. While the actual percentage applied by credit cards varies, a range of two to four percent is common.

That means that after just one payment, your minimum payment will go down the next month (assuming you haven’t added any charges to the card). By keeping your payments constant, however, more and more of each month’s payment will go toward your balance instead of interest.

Second, as one loan is paid in full, you put the extra money toward anotherbalance. This further accelerates the paying of your total debt, without actually requiring any additional funds from your end.

When the next account is paid in full, you will take the extra cash each month and put it toward your third card. Keep following this approach until all of your debt is gone.

How Much Does the Debt Snowball Really Save?

To see the power of this approach, let’s look at an example. We’ll assume that you have the following three credit cards with balances:

BalanceAPRMinimum Payment

We’ve also assumed that the minimum payment is calculated by taking 2% of the outstanding balance. With these assumptions, the current minimum payment for all three cards combined is $340.

Minimum Payment Approach

Now, if you continue to make just the minimum payment each month, that amount will slowly go down as your balances go down. With that approach, how much will you pay in total interest and how long will it take to pay off the balances in full? I hope you’re sitting down for this:

  • Total Interest Payments: $49,007.43
  • Years to Debt Freedom: 60 years and 11 months

Don’t believe the math? Try it for yourself with this calculator from CNN.

Debt Avalanche Approach

Let’s look at the alternative, instead.

In this scenario, you continue to make the initial minimum payment of $340 until all debts are paid. Then, you apply the extra cash to the card with the highest interest rate, and the results change dramatically:

  • Total Interest Payments: $12,365.57
  • Years to Debt Freedom: 7 years and 3 months

The numbers speak for themselves.

Debt Snowball on Steroids

So far in our examples, we’ve calculated the current minimum payment and assumed you’ll continue to pay this amount until the debt is gone. Using the same example above, let’s now assume that you can throw an extra $50 a month at the debt. So instead of paying $340, you’ll pay $390 until you’ve killed your debt entirely.

How will this affect total interest paid and time to debt freedom? Here are the numbers:

  • Total Interest Payments: $8,979.83
  • Years to Debt Freedom: 5 years and 7 months

In other words, an extra $50 a month will shave nearly two years off your time to debt freedom and more than $3,000 in interest payments. Here’s a screenshot from the calculator I used to get these results:

Debt Snowball

Which Debt Should You Pay First?

You may have noticed in the above examples we’ve been applying extra cash to the credit card with the highest interest rate. Not everybody, however, recommends this approach.

Dave Ramsey is well-known for his advice to pay the loan with the lowest balance first. He recommends this approach even if you have other loans with much higher interest rates.

The rationale? By picking the debt with the lowest balance, you’ll get it paid off faster and provide yourself with additional motivation to continue. The road to becoming debt-free can be long and, well, quite boring. But paying off small loans quicker, it may encourage you to keep on keepin’ on.

I don’t want to get into whether Dave Ramsey is right or wrong. But it is important to realize that following Dave’s approach may cost you thousands of dollars in extra interest payments and take you longer to get out of debt.

Using our example from above, let’s assume that you continue to pay $340 a month until you’ve extinguished your debt. In this example, however, any extra cash goes to the card with the lowest balance. With Dave’s approach, here are the results:

  • Total Interest Payments: $13,934.00
  • Years to Debt Freedom: 7 years and 7 months

Now the difference may not seem like much. Compared to paying the cards with the highest interest rate first, Dave’s approach takes just 3 months longer. But his approach costs about $1,500 more in interest payments.

However, if this plan helps you stick to paying off debt, it can be the best one.

In some cases, the best approach is a combination. Maybe you start by paying off a couple of low-hanging-fruit debts with very low balance, regardless of their interest rates. Then you transfer some of your credit card balances to 0% APR cards. You pay those minimums while you pay off debts carrying a much higher interest rate.

Debt Snowball Gotchas

As easy as this debt repayment method is, there are several ways to go wrong:

  1. Watch out for more debt. The most important part of getting out of debt is to stop going into more debt. We’ve talked about this previously but it truly can’t be stated enough. While sometimes debt is outside of your immediate control, oftentimes debt is the result of bad choices. Do everything in your power to avoid new debt.
  2. An emergency fund is a must. Having some money set aside for the unexpected bills will help you avoid more debt.
  3. Work on your credit. With an improved credit score, you can often get interest rates on your debt lowered. In the case of a credit card, it can often be as simple as a phone call to your issuer. With auto loans and home equity lines, it will likely require a refinance; however, the savings can be substantial and often worth the effort.

In the next article in our crushing credit card debt series, we’ll look at Ways to Free Up Extra Cash that you can then put toward your debt.

Author Bio

Total Articles: 1081
Rob founded the Dough Roller in 2007. A litigation attorney in the securities industry, he lives in Northern Virginia with his wife, their two teenagers, and the family mascot, a shih tzu named Sophie.

Article comments

Money Beagle says:

If all of your non-mortgage debt is gone and you are truly anti-debt, there’s no harm in pushing all of your debt resources toward paying your mortgage down earlier.

DR says:

I agree with that in some cases. We have a mortgage at 3.75%, so after taxes, we are paying less than 3%. I still have two children to get through college and perhaps a wedding or two over the next 10 years. So in my case, I’m factoring all of these expenses into the equation.

Roxy says:

Biggest mistake of all Americans is the effort to pay down the house.
Use house market to your advantage, use cash refinance. Smart area buy and it will pay house in couple resales.

I’m really trying to earn enough money to get out of debt using the debt snowball. For now, I’m just trying to pay more than the minimum.

Roxy says:

Do not use card, pay cash

FiClub Frank says:

Have you considered a “Side-gig” to put idle time to use vs. opportunities spending?

frankryans says:

Want to refinance your mortgage to a new lower interest rate? You should – the money you save could be so significant even with 1 or 2% reduction.

DR says:

Frank, couldn’t agree more. We just refinanced down to 3.75% and will save several hundred dollars a month. You can check out today’s mortgage rates by clicking here.

Matt Bell says:

There’s one really important point to keep in mind. In step 3, instead of paying the minimum due, you need to pay the “fixed” minimum. That means continuing to pay the minimum amount that’s due this month each and every month. Assuming you are not taking on more debt, the minimum amount required by the credit card companies will decline a little each month. You’ll be out of debt much faster if you fix your payments instead of paying the declining minimum.

Adam says:

Good article, glad you pointed out both paying the lowest balance and the highest interest method. If you good at doing what you say you are going to do pay the highest interest first. If you need a bit of motivation to help you, you will “see” progress better paying the smaller balances first (but it will cost you a bit more in the long run). Either way to get your debt paid off quickly is better than a method that does not work (like making minimum payments).

KD says:

The wisdom gained from our experience is as follows:

First, stop the bleeding. No more credit; no more debt. We switched from using checks, debit cards, and credit cards to cash for the household and the bank’s online bill-pay for regular monthly bills. This helped us live within our means, and stop charging.

Second, pay off the smallest balances first. This is a must until you have enough savings (and a savings plan to go with it) to cover unplanned emergencies. This way you free up additional cash for the bad months so that you can pay only the creditor’s minimum payment and avoid additional debt in spite of the emergency or falling off the budget wagon.

Finally with savings (and a savings plan), pay off the highest interest rate first. At this point you must be fully committed to no more debt, a savings plan, and faithfully paying the “fixed” minimum on your debt. This is when the “debt snowball” really works. Before this step, you are not prepared for the “debt snowball” commitment.

Rob Berger says:

KD, thanks for sharing your experience with using the debt snowball. Very insightful. I shared your comment with my newsletter readers!

Linda514810 says:

I am trying to pay down my credit card debt. I am paying the one with the highest interest first. I am already seeing a decline in the payment to pay off the debt in three years. Instead I’m still going to use the figure that the credit card company started with. I’m really motivated! Thanks so much for your article. I wasn’t sure if paying off the debt with the highest interest rate was the smart way.

I would like to know if and where it is possible to refinance your mortgage from 5.25% down to the current low with bad credit and $70,000 equity. Don’t qualify for a loan modification plan, which would take a year of grueling paperwork anyway.

Rob Berger says:

Debra, that’s a great question. While there are no easy answers, I’ve tried to address your question as best I can in this article–https://www.doughroller.net/credit/can-you-refinance-a-mortgage-with-bad-credit/

Jackie says:

This is good information. One of the credit card companies we deal with refuses to post our payments in a timely manner. All payments are made through our banks online bill pay system -the credit card company would prefer that we pay our bills through their online system. We have been hit with late fees for the last 3 years trying to pay down the debt. Card company swears that we don’t pay them on time- they agreed to move our due date back and still we are getting socked with late payment fees every month. They have continually harassed us over payments. What can we do about this?

Matenginerd says:

We recently made some 0% interest balance transfers ($6000 and $8700) and have one card remaining that is accruing interest ($5500 16%APR). We’re moving along in the original debt snowball plan and now have an additional $550/month to throw at our debts, but these three cards are being moved to the top of the priority list as we will make the most headway attacking these cards first. Would it be more advantageous to pay down the balances on the 0% card while in the promotional period or ride out the promotional period paying minimums on those two and attack the card that is accruing interest?
I know the promotional period will eventually end and I will probably exercise the 0% balance transfer option again, but I’m wondering if it’s better to attack the one balance getting piled with interest or knock out a larger chunk of the overall debt by paying purely principle on the other two cards.