Payoff method
Debt snowball
The debt snowball method orders debts by balance size, with extra payment directed to the smallest balance first.
What this page covers
This explainer is designed to show what the option is, how the basic mechanics work, and which details people commonly compare before looking at providers, products, or tools.
- Plain-English steps for how debt snowball works.
- A simple example that shows the moving parts without selecting a product.
- Comparison factors, calculators, and source links for deeper research.
How it works
1
List each debt with its balance and required minimum payment.
2
Pay at least the minimum due on every account.
3
Apply any extra payment to the smallest balance.
4
After the smallest balance is paid off, roll that payment into the next-smallest balance.
Simple example
A person has three balances and wants to track progress by closing out smaller balances first.
Card A$500 at 24% APR
Card B$2,400 at 18% APR
Card C$4,000 at 29% APR
Extra payment targetCard A first
Because the order is based on balance size, this method may not minimize interest compared with APR-based ordering.