How to Snowball Credit Debt Payoff

A debt snowball refers to a method of paying down your debt by starting with the smallest debts first. This term is often used in conjunction with following personal finance guru Dave Ramsey's debt reduction plans. Debt snowballing works by providing quick progress to debt reduction. The disadvantage to debt snowballing is that you are not attacking your debt in order of the highest to lowest interest rate, so it may cost you more in finance charges than other debt reduction methods.

Instructions

1

Make a list of all of your credit card and debt accounts. Order the accounts from lowest to highest balance and include the interest rate for the account.

2

Calculate how much money you can put toward your debt every month. Subtract the essentials and minimum credit payments from your income and cut down on non-essentials.

3

Pay the lowest balance credit card with the leftover money from your budget. If card balances are close or tied, pay off the card with the highest interest rate first. Repeat this with all of your credit cards and debt accounts.