What is the debt snowball method?

The definition

The debt snowball is a payoff *ordering*: list debts from smallest balance to largest, pay the minimum on all of them, and direct every extra dollar at the smallest. When it is gone, its entire payment (minimum + extra) rolls onto the next-smallest — the rolling amount "snowballs" as each debt disappears.

The counterpart: the avalanche

The debt avalanche uses the same roll-forward mechanic with a different sort key: highest interest rate first. Because the most expensive debt is retired earliest, the avalanche ordering always produces *equal or less* total interest and an equal or shorter payoff time than any other ordering, for the same payments.

Why the two orderings differ — the math

Interest accrues on balances at their rates, so where the extra payment goes changes what the debt costs while you wait. Three debts, $200/month extra:

Snowball order: A → B → C (smallest first). Avalanche order: B → A → C (27% first). Every month Card B waits, it accrues ≈$56 — the most expensive waiting in the list — so the avalanche attacks it immediately, while the snowball clears the $500 card first for a fast win at a modest interest cost.

Why the snowball exists at all

If the avalanche always wins on arithmetic, the snowball's case is behavioral: it produces the first paid-off account quickly, and a payoff is the kind of concrete progress that keeps a multi-year plan alive. Published consumer-finance research on "small victories" found that closing individual accounts is associated with persisting to the end of a payoff plan. The CFPB describes both orderings side by side — the snowball as the motivation-first method, the highest-rate-first approach as the cost-minimizing one.

When the gap is large vs trivial

The dollar difference between the orderings depends on how far the rate sort differs from the balance sort. If the smallest debts also carry the highest rates, the two orderings converge and the choice costs nothing. The gap is widest when a large balance carries a high rate — exactly the case in the table above, where the snowball parks $2,500 at 27% while it finishes the $500 card.

This explains how the payoff math works, not personal financial advice. It describes the two orderings and what each optimizes — it does not say which fits your situation. For your own plan, a nonprofit credit counselor (e.g. via the NFCC) or a fee-only fiduciary advisor (e.g. via NAPFA) can help.

Cross-reference: see /pages/what-is/zero-based-budget for where the "extra dollar" line comes from + /pages/what-is/compound-interest for the same exponential math working against a borrower.