Does not save maximum interest: The debt snowball method is not necessarily the best choice for saving money on interest. Because you're prioritizing balances over interest rates and only making minimum payments on debts that are low on the list, you could end up paying considerably more in interest over time.
The truth about the debt snowball method is it's a motivational program that can work at eliminating debt, but it's going to cost you more money and time – sometimes a lot more money and a lot more time – than other debt relief options.
The "snowball method," simply put, means paying off the smallest of all your loans as quickly as possible. Once that debt is paid, you take the money you were putting toward that payment and roll it onto the next-smallest debt owed. Ideally, this process would continue until all accounts are paid off.
In terms of saving money, a debt avalanche is better because it saves you money in interest by targeting your highest interest debt first. However, some people find the debt snowball method better because it can be more motivating to see a smaller debt paid off more quickly.
If you were to make only the minimum amount due on all of your debt, it would take about five years to become debt free. In contrast, using the debt snowball method by paying an extra $100 a month on your smallest balance, you'd be out of debt in about three years and save nearly $1,800 in interest.
The best way to pay off $3,000 in debt fast is to use a 0% APR balance transfer credit card because it will enable you to put your full monthly payment toward your current balance instead of new interest charges. As long as you avoid adding new debt, you can repay what you owe in a matter of months.
It will take 47 months to pay off $20,000 with payments of $600 per month, assuming the average credit card APR of around 18%. The time it takes to repay a balance depends on how often you make payments, how big your payments are and what the interest rate charged by the lender is.
In order to pay off $6,000 in credit card debt within 36 months, you need to pay $217 per month, assuming an APR of 18%. While you would incur $1,823 in interest charges during that time, you could avoid much of this extra cost and pay off your debt faster by using a 0% APR balance transfer credit card.
With the debt snowball method, you pay off debts in order from smallest to largest, which can help you rack up some quick wins for motivation.
To pay off $2,000 in credit card debt within 36 months, you will need to pay $72 per month, assuming an APR of 18%. You would incur $608 in interest charges during that time, but you could avoid much of this extra cost and pay off your debt faster by using a 0% APR balance transfer credit card.
It will take 41 months to pay off $30,000 with payments of $1,000 per month, assuming the average credit card APR of around 18%. The time it takes to repay a balance depends on how often you make payments, how big your payments are and what the interest rate charged by the lender is.
Paying off high-interest debt first
If you have debt across multiple cards, it's a good idea to use the avalanche method — where you pay off the balance on the card with the highest interest rate first, then work your way through the rest from highest to lowest APR.
Pay more than the minimum payment each month.
If you have 30k in credit card debt, you need to be making significant payments toward your bill or your debt will continue to multiply. This means paying more than the minimum payment each month, and ideally more than what you added to your statement in the previous month.
The goal is to settle your debts for less than you owe. When a negotiation is successful, the credit card company accepts a lesser amount of money than what you owe to settle your debts and forgive the remaining portion of your balance.
Customer experience: The company has an A+ rating from the Better Business Bureau, with about 275 customer complaints closed in the past three years. The complaints centered on problems with the product or service, billing and collection issues, and advertising and sales issues.
But ideally you should never spend more than 10% of your take-home pay towards credit card debt. So, for example, if you take home $2,500 a month, you should never pay more than $250 a month towards your credit card bills.
Credit card debt in America by the numbers
In short, that amounts to an average balance of $5,733 per cardholder. Eye-watering, to say the least–and the fact that many of us carry no balances makes this statistical average even more alarming.