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 June 24th, 2017
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Name Product Product Description Balance transfer rate (p.a.) Purchase rate (p.a.) Annual fee Interest Saved
Virgin Australia Velocity Flyer Card - Exclusive Offer
Earn 2 Velocity Points on top of the standard earn rate per $1 spent in the first 3 months, plus a $129 Virgin Australia Gift Voucher each year.
0% p.a. for 18 months
20.74% p.a.
$64 p.a. annual fee for the first year ($129 p.a. thereafter)
HSBC Platinum Credit Card
Earn 1 Reward Point per $1 of eligible spend and receive complimentary travel and purchase protection insurances.
0% p.a. for 22 months with 2% balance transfer fee
19.99% p.a.
$99 p.a.
ANZ Platinum Credit Card - Exclusive Offer
Receive a low introductory offer of 0% p.a. on purchases for 3 months and 0% p.a. on balance transfers for 12 months.
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)
St.George Vertigo Visa
Receive up to 55 days interest-free on purchases and the ability to make contactless payments with Visa payWave technology.
0% p.a. for 14 months
13.24% p.a.
$0 p.a. annual fee for the first year ($55 p.a. thereafter)
HSBC Low Rate Credit Card
Receive up to 55 days interest-free on purchases. Also enjoy exclusive offers with the home&Away Privilege Program.
0% p.a. for 15 months with 2% balance transfer fee
13.25% p.a.
$55 p.a.
NAB Low Rate Credit Card
Receive up to 55 days interest-free on purchases, special offers from Visa Entertainment and Tap and Pay capabilities.
0% p.a. for 16 months with 2% balance transfer fee
13.99% p.a.
$59 p.a.
Citi Rewards Platinum Credit Card
A long-term balance transfer offer with the Citi Rewards Platinum Card. Earn extra points on eligible international spend, plus complimentary travel insurance.
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)
NAB Premium Card
Benefit from premium credit card advantages including travel insurance, Platinum Concierge Service plus 0% p.a. for 20 months on balance transfers.
0% p.a. for 20 months with 2% balance transfer fee
19.74% p.a.
$90 p.a.
American Express Essential®  Credit Card
Get Smartphone Screen Insurance of up to $500 when you pay for your phone or contract with your Essential Credit Card.
0% p.a. for 12 months with 1% balance transfer fee
14.99% p.a.
$0 p.a.
St.George Vertigo Platinum
Offers complimentary travel insurance, complimentary purchase insurance and access to a 24/7 personal concierge service.
0% p.a. for 20 months
12.74% p.a.
$99 p.a.
ANZ Low Rate Platinum
Enjoy platinum benefits with exclusive discounts, complimentary travel and purchase insurances and a 24/7 personal concierge.
0% p.a. for 16 months with 2% balance transfer fee
11.49% p.a.
$99 p.a.
NAB Low Fee Card
Receive complimentary purchase protection insurance, special offers from Visa Entertainment and up to 44 days interest-free on purchases.
0% p.a. for 16 months with 2% balance transfer fee
19.74% p.a.
$30 p.a.
NAB Velocity Rewards Premium Card
Offers up to 1 Velocity point per $1 on purchases, combined with complimentary insurance covers and a concierge service.
0% p.a. for 6 months
19.99% p.a.
$150 p.a.
NAB Velocity Rewards Card
This dual Amex and Visa card offers up to 0.75 Velocity Points per $1 spent on eligible purchases and special Visa Entertainment offers.
0% p.a. for 6 months
19.99% p.a.
$95 p.a.
NAB Qantas Rewards Card
A dual Amex and Visa card that allows you to earn up to 0.75 Qantas Points per $1 spent, plus complimentary purchase protection insurance.
0% p.a. for 6 months
19.99% p.a.
$95 p.a.
NAB Rewards Classic Card
Earn 0.75 NAB Rewards Points per $1 spent and receive complimentary purchase protection insurance.
0% p.a. for 6 months
19.99% p.a.
$95 p.a.
NAB Rewards Platinum Card
Collect 50,000 bonus points when you spend $2,500 on everyday purchases within 60 days of account opening.
0% p.a. for 6 months
19.99% p.a.
$195 p.a.
Woolworths Everyday Platinum Credit Card
Receive a $100 eGift Card when you apply by 30 June 2017 and make an eligible purchase by 31 July 2017.
0% p.a. for 14 months
19.99% p.a.
$0 p.a. annual fee for the first year ($49 p.a. thereafter)

Compare up to 4 providers

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American Express Velocity Platinum Card
American Express Velocity Platinum Card

Interest rate

20.74

Annual fee

375
ANZ Platinum Credit Card - Exclusive Offer
ANZ Platinum Credit Card - Exclusive Offer

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St.George Vertigo Platinum
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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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