Debt Snowball Method
A debt payoff strategy where you pay minimums on all debts, then focus extra payments on the smallest balance first for psychological wins.
What You Need to Know
The debt snowball method prioritizes quick wins over mathematical optimization. By paying off small debts first, you gain momentum and motivation to tackle larger balances.
How It Works:
- List all debts by balance (smallest to largest)
- Pay minimums on everything
- Attack the smallest debt with all extra money
- Once eliminated, roll that payment to the next smallest
Pros: Psychological boost from quick wins, better for people who need motivation. Cons: Costs more in interest than the avalanche method.
Best For: Anyone who has struggled to stick with debt payoff plans. Momentum matters.
Sources & References
This information is sourced from authoritative government and academic institutions:
- consumerfinance.gov
https://www.consumerfinance.gov/about-us/blog/which-debt-should-you-pay-off-first/
Related Calculators & Tools
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Related Terms in Debt & Credit
APR (Annual Percentage Rate)
The total yearly cost of borrowing money, including interest and fees, expressed as a percentage.
Amortization
The process of paying off a loan through regular payments that cover both principal and interest.
Annual Fee
Yearly charge for having a credit card—$0 to $550+. Premium cards charge fees but offer rewards that can exceed cost for high spenders.
BNPL (Buy Now, Pay Later)
A short-term financing option that lets you split purchases into installment payments (usually 4 payments over 6 weeks) with little or no interest—if you pay on time.
Balance Transfer
Moving credit card debt from one card to another, typically to take advantage of a lower interest rate or 0% promotional APR.
Balance Transfer Fee
One-time charge (3-5%) to transfer debt to 0% APR card. $5K balance = $150-250 fee. Must save more than fee to make transfer worthwhile.