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How to Pay Off Credit Card Debt Using the Snowball Method

Information verified correct on December 10th, 2016

Personal finance expert Dave Ramsey is well known for introducing the Snowball method.

Helping to eliminate credit card debt, the Snowball method has helped many people to become debt free. However, it isn't suitable for everyone. In order to decide whether you could eliminate your credit card debt using this method, you first need to understand what it involves.

What is the Snowball Method?

By using the Snowball method, you will be paying off your lowest debt first. Out of your credit cards, which one has the lowest balance? Aim to pay that off first and then use the payment that you would have made for that debt, to pay off the others. Each time you pay off a little of your debt, it leaves you with more money to spend on the others.

Ideally, you will need to be able to afford more than the minimum repayment for at least one of your debts. When you focus on one debt at a time, it helps you to pay off your balance quickly. Just think, you are currently splitting up your payments and paying the minimum amount on each debt. If you increase the repayments on just one of them, you will pay it off quickly.

How to Put the Snowball Method into Practice

If you would like to put the Snowball method into practice, say you have $5,000 worth of debt on several credit cards. On one card you owe $2000, on another you owe $1250, then on another you owe $1500, and finally n another card you owe $250. You pay a minimum repayment for each one.

On the $250 debt, you may be paying $25 per month for example. If you manage to pay just the minimum for the higher debts, you could pay a little bit more towards the $250 one. The more that you can pay off, the more you will save in the long run.

Then once you have paid the $250 debt off, you can then use the $25 minimum repayment to pay off the next lowest debt. You continue this until all of your debts have been paid off.

When the Snowball Method Might Not Pay Off

There are some instances where the Snowball method might not be favourable to you. For example, it could work out more profitable for you to pay off the highest credit card debt first. You could save a lot of money in interest if you do it the other way around.

That is the only time when this method might not be suitable for you. However, most people do find it a lot easier to pay off their smaller debts first. As each debt is paid off, it gives you motivation to pay off the rest. That is why the Snowball method is currently so popular.

Eliminating credit card debt can be frustrating. However, by following the above method, you could get out of debt quicker than you think.

Learn more about snowball debt reduction strategy

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Balance Transfer Credit Cards Comparison

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Balance transfer rate (p.a.) Purchase rate (p.a.) Annual fee Interest Saved
Virgin Australia Velocity Flyer Card - Balance Transfer Offer
Offers 0% p.a. interest rate on balance transfers for 18 months to help you manage your existing credit card balance with a reduced annual fee in the first year.
0% p.a. for 18 months 20.74% p.a. $64 p.a. annual fee for the first year ($129 p.a. thereafter) Go to site More info
HSBC Platinum Credit Card
Receive a full annual fee refund and save $149 if you meet the $6,000 spend requirement. Enjoy a balance transfer offer and platinum card benefits such as complimentary insurances and concierge services.
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NAB Low Rate Credit Card
The NAB Low Rate Card offers 0% p.a. on purchases and balance transfers for 15 months. This card also comes with a low annual fee.
0% p.a. for 15 months with a one off 3% balance transfer fee 0% p.a. for 15 months (reverts to 13.99% p.a.) $59 p.a. Go to site More info
NAB Low Fee Card
Enjoy a low introductory rate of 0% p.a. on balance transfers and purchases for 15 months.
0% p.a. for 15 months with a one off 3% balance transfer fee 0% p.a. for 15 months (reverts to 19.74% p.a.) $30 p.a. Go to site More info
St.George Vertigo Visa
Introductory offer of 0% p.a. for 18 months on balance transfers and 1% p.a. for 12 months on purchases, plus a low annual fee.
0% p.a. for 18 months 1% p.a. for 12 months (reverts to 13.24% p.a.) $55 p.a. Go to site More info
St.George Vertigo Platinum
A platinum card with a balance transfer offer of 0% p.a. for 18 months and an introductory purchase offer of 1% p.a. for 12 months with an annual fee waiver for the first year.
0% p.a. for 18 months 1% p.a. for 12 months (reverts to 12.74% p.a.) $99 p.a. Go to site More info
Virgin No Annual Fee Credit Card
Enjoy a long term balance transfer plus a $100 cashback offer (spend criteria applies) and never pay an annual fee for this card.
0% p.a. for 18 months with 2% balance transfer fee 18.99% p.a. $0 p.a. Go to site More info
Westpac Low Rate Card
A no frills credit card with an introductory rate of 0% p.a. for 16 months on balance transfers and 1% p.a. for 12 months on purchases.
0% p.a. for 16 months 1% p.a. for 12 months (reverts to 13.49% p.a.) $59 p.a. Go to site More info
American Express Essential Credit Card
Receive a $50 credit on eligible spend and get Smartphone screen insurance combined with a no annual fee for life card. Also enjoy a 0% p.a. balance transfer rate for 12 months.
0% p.a. for 12 months with 1% balance transfer fee 14.99% p.a. $0 p.a. Go to site More info
Bank of Melbourne Vertigo Visa Credit Card
Enjoy a low annual fee combined with 0% p.a. balance transfer offer for 18 months and 1% p.a. for up to 12 months on purchases.
0% p.a. for 18 months 1% p.a. for 12 months (reverts to 13.24% p.a.) $55 p.a. Go to site More info
Bank of Melbourne Vertigo Platinum
A platinum card with a low balance transfer offer of 0% p.a. interest for 18 months and 1% p.a. for 12 months on purchases combined with complimentary insurance covers.
0% p.a. for 18 months 1% p.a. for 12 months (reverts to 12.74% p.a.) $99 p.a. Go to site More info
BankSA Vertigo Visa
A low interest rate card with a low annual fee, a long term balance transfer offer of 0% p.a. for 18 months and an introductory offer of 1% p.a. for 12 months on purchases.
0% p.a. for 18 months 1% p.a. for 12 months (reverts to 13.24% p.a.) $55 p.a. Go to site More info
Citi Simplicity Card
Take advantage of the 0% p.a. for 9 months offer on balance transfers, a low interest rate on purchases, an annual fee waiver for life, plus 5% cashback on retail purchases.
0% p.a. for 9 months 19.99% p.a. $0 p.a. Go to site More info
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One Response to How to Pay Off Credit Card Debt Using the Snowball Method

  1. Default Gravatar
    Peter | March 8, 2011

    A nice article explaining when to use and when not to use snowball method.

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