Debt snowball

How it works

The method ranks debts by balance, smallest first, regardless of interest rate. Minimum payments continue on every account, and whatever extra the budget allows goes to the smallest one. When it is paid off, its minimum and the extra amount both move to the next smallest, so the payment aimed at each new target keeps growing, like a snowball rolling downhill.

The appeal is momentum. Clearing whole accounts early gives visible progress and leaves fewer bills to track. The tradeoff is cost: because the order ignores interest rates, a large high-rate debt may wait longest, so with the same monthly budget the snowball can mean paying more interest overall than the avalanche, which targets the highest rate first.

Like the avalanche, the snowball assumes there is money left after essential bills and minimum payments. If the minimums alone do not fit, reordering extra payments cannot close that gap. In that situation, a nonprofit credit counselor may be able to help review options for managing money and repaying debts.

Related terms

Sources and further reading

• CFPB: Highest-interest and snowball debt reduction strategies
• CFPB: What to know about consolidating credit card debt

Examples are illustrative and focus on U.S. personal finance. This page is educational, not individual financial, investment, tax, or legal advice. Read our editorial approach or report a correction.