A debt snowball is a trick that many debtors use to quickly repay their credit card debt. The debt snowball creates a psychological advantage in that the strategy requires repayments to be made on the cards with the lowest balances first.
Here’s how you can use the debt snowball to repay debt:
1. Make a list of debts in order of their balances – Making a list will give you a plan to repay your credit card balances. Those with the highest balances should be the least priority, while the lowest balances should be the highest priority.
2. Determine a repayment schedule you can afford – Make a budget to see just how much you can afford to pay each month to reduce your credit card balances. When you make a repayment schedule, realize that the debt snowball asks borrowers to pay merely the minimum payment on all credit cards with the exception of the card with the lowest balance.
3. Get to work – By applying minimum payments to all cards but the card with the lowest balance, you can make quick work by eliminating one small debt routinely. Once you pay off your card with the lowest balance, begin working on the next lowest balance card to eliminate that debt, using the saved money on the first credit card to make even faster work of the second largest debt and so on.