How the Debt Snowball Method Works (and When to Use It)

The debt snowball is the most popular payoff strategy for one reason: it works because it feels like winning. You pay off your smallest balance first, get a quick victory, and use that momentum to keep going.

The four steps

The method is simple enough to run on a napkin:

• List every debt from smallest balance to largest, ignoring interest rate.
• Pay the minimum on all of them so nothing goes delinquent.
• Throw every spare dollar at the smallest balance.
• When it is gone, roll its whole payment onto the next debt — and repeat.

Why momentum matters

A Harvard Business Review study found that people who concentrated on their smallest balances first were more likely to pay off all their debt. Personal finance is behavioral as much as mathematical — the best plan is the one you finish.

When to choose avalanche instead

If one of your debts has a much higher APR than the rest, the snowball can cost noticeably more interest. In that case the avalanche method saves more money. Run both in the comparison calculator and look at the dollar difference before deciding.