How to Use the Debt Snowball to Pay Off Credit Card Debt

Having a great deal of debt can, indeed, be depressing.

Credit card debt is expensive, and it seems to be paid down at a rather slow rate. ¬†Because of the high interest charged, if you are only paying the minimum balance, it can take years to pay off your credit card — and you could end up repaying an amount several times what you originally borrowed.

One way to feel as though you are making better progress with paying down your debt is to employ the debt snowball method popularized by Dave Ramsey. The debt snowball is a way of systematically paying down your credit card debt, while remaining enthusiastic about the process.

How to Use the Debt Snowball to Pay Off Credit Card Debt

Step 1: Order Your Credit Card Debts


Your first step is to order your credit card debts.

List out your balances, and your minimum payments. The debt snowball method makes use of psychology to help you stay motivated throughout. You start with the credit card with the lowest balance. List your cards in order of balance, lowest to highest, with the minium balances that you are to pay.

Step 2: Figure Out How Much You Can Pay Down Each Month

Next, determine how much money you can afford to put toward credit card debt repayment each month. Consider your current budget Look for money leaks to plug, and look for ways to earn extra money. Once you know how much extra you can put toward credit card repayment, it’s time to get started.

Step 3: Pay Down Your Debts in Order

using debt snowball for debt

The debt snowball will help you gain ground on your credit card debt.

Start with the lowest balance on your list. Add the money that you can put toward debt reduction to the minimum payment. So, if you decided that you can put $200 a month toward debt reduction, and you first credit card debt has a minimum payment of $35, you would pay $235 a month until that debt was retired.

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Meanwhile, keep paying the minimum on your other credit cards. When your first credit card is paid off, move on to the next card on your list. But make sure that you keep the full $235 to add to your next minimum. So, if your second card had a minimum of $40, then you would pay $275 per month. As you retire debts in order, you end up with more going toward the next debt. When you get to your last debt, you are paying a larger amount — and hopefully paying down debt at a faster rate.

What about Interest Rate?

The point of the debt snowball method is to be encouraging. ¬†(Though we’d like to think otherwise, a lot of what happens in out personal finances is psychological.)

So, even though you would pay less overall by retiring your credit card debt in order of highest interest rate to lowest interest rate, it can be discouraging to start out that way. Starting with the smaller balance encourages many to keep with the program, and to see progress quicker.

However, if you can remain motivated with slower initial progress, you can modify your debt snowball so that you start with the highest interest rate.

You’ll save more money.

But, if you are primarily interested in getting started and feeling as though you’re making progress, a “traditional” debt snowball might be for you.

Have you used a debt snowball method to pay off credit card debt? How did you do with it?

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Published or updated September 19, 2012.

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