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Reduce Your Debt with the Debt Snowball Method

Reduce Your Debt with the Debt Snowball Method

Jenius Bank Team8/31/2023 • Updated 4/4/2024
Illustration of money chasing a snowball rolling downhill.

The debt snowball method may help you reduce your debt.

Debt has a way of piling up quickly. If you’re trying to stay on top of credit card bills, student loan payments, car loans, and more, you’re not alone. The average American adult has approximately $5,910 of just credit card debt, according to Experian.1

With rates creeping up,2 now may be a good time to prioritize paying off those credit card balances… and any other balances you may want to eliminate. And the debt snowball method may be just the tool you need.

Key Takeaways

  • The debt snowball method works by paying off the smallest balance first and working your way up to the largest.

  • Paying off your debt one at a time with the snowball method may help you stay motivated by seeing progress sooner.

  • Consider combining the debt snowball method with other repayment methods, such as the debt avalanche or debt consolidation with a personal loan, to help you tackle those balances in a way that works for you.

What Is the Debt Snowball Method?

The debt snowball method is a simple way to pay off your debt, one account at a time. It works by tackling the smallest balance you have first, paying off that balance in full and then tackling the next smallest one on the list.

For the method to be effective, you still need to make the minimum required payments on your other debts. Otherwise, you may risk penalties, fees, and higher interest costs in the long run. That won’t help your cause!

You also want to avoid taking on new debt when you pay one off. Remember, the goal is to eliminate the debt you already have, not replace it with more. Paying down one credit card while running up a balance on another won’t help.

Debt Snowball Vs. Debt Avalanche Method

Though the debt snowball method could be effective and could help you pay down debt quickly, it’s not the only option you have. The debt avalanche method is a similar debt payoff method that prioritizes the highest interest debt first.

Let’s take a quick look at how these methods differ.




Best for

Debt Snowball

Small wins offer motivation. Starting with the smallest debt may make implementation easier.

Rates aren’t considered. Pay off may take longer since higher interest debt continues accruing.

People who may struggle with motivation and feel a mental boost after paying off a debt.

Debt Avalanche

Tackles highest interest debt first and helps to reduce interest costs faster. Pay off may also be faster.

First balance takes longer to pay off than others (since it’s bigger). May require more motivation to sustain the plan.

People who want to minimize interest costs and prioritize saving in the long run.

As you consider these methods, think about which would fit better into your lifestyle and help you on your longer-term journey to financial wellness.

If you find paying off debt to be stress-inducing and need a simple plan, the debt snowball method may work best for you. On the other hand, if you’re looking to save on interest in the long run, the debt avalanche method may be a better option.

Steps to the Snowball Method

So, now that you understand what the snowball method is, it’s time for action. Good news - it’s easier than you might think! Here are the steps you could take to start paying off what you owe with this method.

Step 1: List out Your Debts

Get started by listing which debts you want to pay off and what order to tackle them in. The best way to do that is to order your debts from the smallest to largest.

Step 2: Consider Your Budget

Take a look at your budget to determine how much you’re able to allocate toward your debt payments overall. The idea is that you’re getting ahead of minimum payments and putting extra resources toward that smallest balance to knock it out.

Step 3: Calculate Your Minimum Payments

It’s important to figure out exactly how much you must pay on each debt you have. You can’t let other debts go unpaid while you’re tackling the first, targeted debt. Letting minimum payments slide could cause other problems with fees or even dings on your credit. It’s a balancing act!

If you’re not sure what your minimum payments are, reach out to your lender or check your most recent statement for more information.

Step 4: Choose Your Starting Point

Once you have your budget and your payoff order, let the payoff begin!

Step 5: Keep Going

We know, easier said than done. You got this!

After you pay the smallest balance off, use the money that you were previously allocating to that payment as part of your payment on the next debt. By doing this, you create the snowball effect—making a bigger payment towards each debt over time.

Debt Snowball Example

Let’s examine a quick example of how this method works. Suppose your current debt situation looks like this. Please note that these numbers are for illustrative purposes only.

  • Debt A: Medical bill with a balance of $1500 and a minimum payment of $100

  • Debt B: Credit Card with a balance of $1900 and a minimum payment of $150

  • Debt C: Personal loan with a balance of $3500 and a minimum payment of $200

You determine that you have $1000 in your monthly budget to allocate to debt payments.

With the snowball method, you would split your payments like this:

  • $150 to the credit card

  • $200 to the personal loan

  • $650 to the medical bill

This allocation ensures you’re making the minimum payment on each debt while also making a larger payment towards the smallest debt.

Once the medical bill is paid off, you would reallocate the $650 from that payment toward the credit card bill, meaning each month you’d be paying $800 to your credit card company and $200 to the personal loan.

Once you've taken care of the credit card, you would allocate all $1000 to your personal loan payment.

Is the Debt Snowball Method Right for You?

Ultimately, just about any debt repayment strategy could help you pay down what you owe faster than you would with minimum payments alone.

Both the debt snowball and debt avalanche methods are great options, but since they work in different ways, one method may be better than the other for you. Consider your financial situation and your motivations for paying off your debt.

If you’re looking to potentially save money on interest payments and get out of debt faster, the avalanche method may be a better choice. But if you struggle to stay motivated and want to see progress more quickly, even if it means potentially paying more interest in the long run, the snowball method may be the best option.

Other Ways to Pay Off Debt

The debt snowball method is just one way to pay off debt and potentially help you improve your financial situation. But it’s not the only option available to you.

Two other common ways to tackle debt include.

  • Debt Consolidation Loan: Debt consolidation loans allow you to combine multiple high interest debts, like credit card balances, into one loan. As a result, you have one payment monthly for the total owed instead of multiple payments across various cards. Additionally, since rates are typically lower for these loans, you may end up with a smaller monthly payment and less interest burden over time. Personal loans are commonly used for debt consolidation.

  • Balance Transfers: Balance transfers involve moving debt from one credit card to another—usually taking advantage of a promotional rate. That said, these low-rate periods tend to be short, and once they expire, the “regular” rate kicks in. Balance transfers are most beneficial when you’re able to pay off the balance within the promotion period. Be sure to read the fine print and watch out for fees since most balance transfer offers have them.

Regardless of the debt repayment strategy you choose, make sure it fits your specific financial situation. If you have questions, consider consulting a financial advisor to find the best option for you.

Final Thoughts

Paying off debt is one of the best ways to improve your overall financial wellness, and the debt snowball method may help you do just that. The key to success lies in taking your time and reviewing your situation before you start making payments.

By prioritizing which debts you want to pay off and when, you may be able to reduce your debt more quickly. Whether you choose the debt snowball method, the debt avalanche method, or another approach, the key is to take proactive steps towards paying off your debt.

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