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How to Use the Debt Snowball Payment Method

If you owe money on multiple credit cards, you may be wondering where to focus your efforts and which card to pay off first. Some experts believe, when attempting to manage your debt, you should aim to eliminate the card with the highest interest rate first. While this method is effective, if the card with the highest rate also has the highest balance, it may take over a year to make a dent in that card, leaving you feeling like you are spinning your wheels and getting nowhere. Instead, try focusing your efforts on eliminating the smallest balance first and gradually moving on to your higher balances. Using this method, known as the debt snowball payment method, you will see results and a light at the end of the tunnel much faster.

Start By Making A Debt List

To begin your snowball, start by listing all your credit card debts in order from smallest to largest. Remember, you want to attack the smallest debt first so you see results faster. Next, total up the minimum payments you are making on all of your cards to see how much you are paying each month. Continue paying the minimum on all of your cards except the card with the lowest balance. If possible, try to add money to that monthly payment. Paying more than the minimum will help you pay off the balance faster. For instance, if your smallest debt is $100 with a minimum $10 monthly payment, by increasing your monthly payments to $20, you will pay off the balance in about six months versus 10 months.

The Snowball Effect Begins

Once you have eliminated the balance on your lowest card, the debt repayment snowball effect begins. Apply the $20 you were paying on your lowest card to the next lowest balance in line. If you were paying $30 a month, you will now be paying $50. Once that balance is eventually paid, apply that $50 you were paying per month to your next lowest balance and so on.

Remember, once you have paid off a credit card, you are going to simply add that monthly payment to the next card in line. So, if at the beginning of this process you were paying a total of $300 per month on all of your cards, you will continue to pay $300 total, even after you begin wiping your cards free of balances. As you continue to apply more money to the next card in line, you will see the snowball really pick up speed. As your snowball gains momentum, so will your motivation to maintain a steady path to eliminating your debt.

Contact Advantage CCS for More Information on Debt Management

If you need help managing your credit card payments, contact Advantage CCS today. Our experienced credit counselors can help you get your payments under control and get you out from under debt. We also help you learn to plan and stick to a budget and help manage your debt and help you create the financial freedom you desire.