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The debt snowball method is a debt payoff strategy where you attack the smallest balance first, regardless of APR. Designed for psychological motivation through quick wins.
The snowball method prioritizes psychological reinforcement over mathematical optimization. By eliminating small debts first, the borrower experiences quick wins that build momentum and adherence to the payoff plan. Studies on behavioral finance suggest this method has higher real-world completion rates than the more mathematically efficient avalanche method.
A borrower has three debts: $500 medical bill at 0% APR, $5,000 credit card at 24% APR, and $8,000 student loan at 6% APR. Using the snowball method, they pay minimums on all three plus all extra toward the $500 medical bill (smallest). Once paid, they roll that payment into attacking the $5,000 credit card. Then the $8,000 student loan.
Compared to the avalanche method: The avalanche method targets highest APR first regardless of balance. Avalanche is mathematically optimal (saves the most total interest); snowball is psychologically optimal (highest completion rate). Both are valid.