4 Reasons to 'Snowball' Your Credit Card Debt Payoff

As I've learned time and time again in my life, the best way out is usually through. This is even the case when it comes to paying off credit card debt. After paying off a big chunk of debt last year, I'm a fan of the "debt snowball" method.

Creating a debt snowball consists of making a list of your debts by amounts owed, smallest to largest. Add the minimum payments owed to each to your list, too. Decide how much money you can spare to pay toward debt every month. To start rolling your "debt snowball," you make only the minimum payment due on all but the smallest debt amount -- you'll send the bulk of your debt-payoff money to that account every month until it's paid off.

This sends your "snowball" downhill. Then you start the process over again with your next-smallest debt, pay that off, and so on. Except now you've freed up some extra money by paying off one account in full, so you can pay even more to that smallest debt.

As time goes on, you can send more and more money to the debt you're currently focusing on. By the end, you're sending all your debt-payoff money to your final (and largest debt) -- your "snowball" is huge and you're almost out of debt. Sounds good, right? Here's why I like this method.

1. For the motivation

Paying off debt is hard. Whether you're doing it by cutting back on your fun spending or bringing in extra income (perhaps via a side hustle, as I did), it can be very demoralizing, and when you're just starting out, it's easy to feel as if you're all alone and will never be out from under your debt. The great thing about snowballing it is that you get some motivation right from the start: Seeing your smallest debts fall away quickly. This is especially crucial early in the process.

2. For the faster simplification of your finances

Yes, okay, consolidating your debts into one loan payment will also simplify your finances, and will do so more quickly than snowballing debt -- when you take out a debt consolidation loan, you'll end up with just one payment and a set amount to pay each month. This works for many people (but this method isn't accessible to everyone; more on that below), but snowballing debt will also result in fewer accounts to manage. And if you start with the smallest debts, you could get there pretty quickly.

3. For the low bar of entry

One potential issue with debt consolidation loans is that you need to have a pretty strong credit score to qualify for a good interest rate on one. If you're carrying a lot of debt and have a less-than-perfect payment history, you might struggle to be approved for a loan with a lower interest rate than what you're paying on your various debts. The nice thing about snowballing your debt is that you can start now, from where you currently are, and watch your credit score improve as you pay things off.

4. For the learning experience

Snowballing my debt was a learning experience for me. I got to be up close and personal with my debt, and I had to reckon with the fact that getting into debt is easy -- but getting out of it is hard. Along the way, I was able to build new habits, such as paying off credit cards every month (honestly, sometimes I pay them off every week now). And going through this taught me that I never want to end up in the same situation again, if I can help it.

Wait, won't snowballing my debt cost me more?

Yes, it probably will. For reference, when you pay off debt via the avalanche method, you also pay accounts off one by one, like a snowball. But the order in which you focus on the debts is by highest interest rate first. So by paying off your highest interest rate debt before any others, yes, you'll save some money on those interest charges.

But what if your higher interest rate debts are also the largest ones? It'll be quite a while before you can kiss those debts goodbye, and you might struggle to stay motivated. Your mileage may vary, but I was willing to pay a little more interest in exchange for the feeling of gratification I got from paying off my first few debts in short order.

Ultimately, the best debt payoff method is the one you can stick with. For you, that might be committing to make a big loan payment every month until your debt is gone, or it could be focusing on your highest-interest debt first. For me, it was rolling a debt snowball. Consider your own finances and motivation to pay off debt to pick the right method for you -- you got this.