lady playing with a snowball

How to Pay Off Credit Card Debt Using the Snowball Method

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

Rates last updated September 27th, 2017
$
% p.a.

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Name Product Balance transfer rate (p.a.) Purchase rate (p.a.) Annual fee Amount Saved Product Description
NAB Premium Card - Exclusive Offer
0% p.a. for 24 months
19.74% p.a.
$90 p.a.
Until 1 October 2017, exclusive to finder.com.au, enjoy a no BT fee, balance transfer offer with platinum privileges, including travel insurance.
Virgin Australia Velocity Flyer Card - Balance Transfer Offer
0% p.a. for 18 months
20.74% p.a.
$129 p.a.
Earn 3 bonus Velocity Points per $1 for the first 3 months, a first year annual fee refund and a yearly $129 Virgin Australia Gift Voucher.
St.George Vertigo Platinum
0% p.a. for 24 months with 2% balance transfer fee
12.74% p.a.
$99 p.a.
Offers complimentary travel insurance, complimentary purchase insurance and access to a 24/7 personal concierge service.
Citi Rewards Platinum Credit Card
0% p.a. for 24 months with 1.5% balance transfer fee
20.99% p.a.
$49 p.a. annual fee for the first year ($149 p.a. thereafter)
Offers a long-term balance transfer. Earn extra points on eligible international spend, plus complimentary travel insurance.
Westpac Low Rate Card - Online Only Balance Transfer Offer
0% p.a. for 24 months with 2% balance transfer fee
13.49% p.a.
$59 p.a.
Take advantage of 0% p.a. for 24 months on balance transfers with a 2% balance transfer fee. Plus, use of the Westpac mobile banking app.
ANZ Platinum Credit Card - Exclusive Offer
0% p.a. for 12 months
0% p.a. for 3 months (reverts to 19.74% p.a.)
$0 p.a. annual fee for the first year ($87 p.a. thereafter)
Exclusive to finder, receive 0% p.a. interest on purchases for 3 months and 0% p.a. on balance transfers for 12 months with no balance transfer fee.
St.George Vertigo Visa
0% p.a. for 18 months with 2% balance transfer fee
13.24% p.a.
$55 p.a.
Receive up to 55 days interest-free on purchases and the ability to make contactless payments with Visa payWave technology.
HSBC Platinum Credit Card
0% p.a. for 22 months with 2% balance transfer fee
19.99% p.a.
$99 p.a.
Earn 1 Reward Point per $1 of eligible spend and receive complimentary travel and purchase protection insurances.
Bank of Melbourne Vertigo Platinum
0% p.a. for 24 months with 2% balance transfer fee
12.74% p.a.
$99 p.a.
Get a range of complimentary insurance covers, access to a 24/7 concierge and up to 55 days interest-free on purchases.
Bankwest Breeze Classic Mastercard
0% p.a. for 13 months with 2% balance transfer fee
0% p.a. for 13 months (reverts to 12.99% p.a.)
$79 p.a.
Receive up to 55 day interest-free on purchases and free worldwide emergency card replacement.
NAB Low Fee Card
0% p.a. for 16 months with 2% balance transfer fee
19.74% p.a.
$30 p.a.
Receive complimentary purchase protection insurance, special offers from Visa Entertainment and up to 44 days interest-free on purchases.
HSBC Low Rate Credit Card
0% p.a. for 15 months with 2% balance transfer fee
13.25% p.a.
$55 p.a.
Receive up to 55 days interest-free on purchases. Also enjoy exclusive offers with the home&Away Privilege Program.
Virgin Money Low Rate Credit Card
0% p.a. for 12 months
11.99% p.a.
$99 p.a.
Receive up to 44 days interest-free on purchases and the optional insurance coverage of CreditShield Edge.
BankSA Vertigo Visa
0% p.a. for 18 months with 2% balance transfer fee
13.24% p.a.
$55 p.a.
Get up to 55 days interest-free on purchases and be protected by a 24/7 fraud monitoring service.
NAB Low Rate Platinum Card
0% p.a. for 16 months with 2% balance transfer fee
13.99% p.a.
$100 p.a.
Enjoy the protection of 7 complimentary insurances including overseas travel and purchase protection insurance.
ANZ Low Rate Platinum
0% p.a. for 16 months with 2% balance transfer fee
11.49% p.a.
$99 p.a.
Enjoy platinum benefits with exclusive discounts, complimentary travel and purchase insurances and a 24/7 personal concierge.
Woolworths Everyday Platinum Credit Card
0% p.a. for 14 months
19.99% p.a.
$0 p.a. annual fee for the first year ($49 p.a. thereafter)
Receive a $50 eGift Card when you apply by 31 December 2017 and make an eligible purchase by 31 January 2018.
American Express Essential®  Credit Card
0% p.a. for 12 months with 3% balance transfer fee
14.99% p.a.
$0 p.a.
Receive a $50 credit when you apply online, are approved and spend $750 on your new card within the first 3 months of card membership.
American Express Explorer® Credit Card
0% p.a. for 12 months with 1% balance transfer fee
20.74% p.a.
$395 p.a.
Receive a $400 Travel Credit every year and up to two entries per year to the American Express Lounge at Sydney International Airport.
Virgin Australia Velocity Flyer Card - Bonus Points Offer
0% p.a. for 18 months
20.74% p.a.
$64 p.a. annual fee for the first year ($129 p.a. thereafter)
Earn up to 60,000 bonus Velocity Points in the first 3 months on eligible spend and enjoy a discounted annual fee of $64 for the first year.
Citi Platinum Credit Card - 100k Bonus Points
0% p.a. for 15 months with 1% balance transfer fee
20.99% p.a.
$49 p.a. annual fee for the first year ($149 p.a. thereafter)
Earn 100,000 Reward Points, take advantage of a long-term balance transfer offer and receive complimentary travel insurance.

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NAB Premium Card - Exclusive Offer
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St.George Vertigo Platinum
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NAB Low Rate Credit Card
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  1. Default Gravatar
    PeterMarch 8, 2011

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

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