The debt snowball method was famously introduced by a well-respected radio talk-show host, Dave Ramsey who claims momentum – not math – is the key to eliminating debt. The Debt Snowball method iterates that you should be paying off the debt with the lowest balance first, regardless of what the interest rates are on your other balances. You should make the minimum payments on all your other balances except your smallest balance, which you should pay as much as you can to get rid off. When the smallest debt is paid in full, you roll the money you were paying on that debt into the next smallest balance.

Dave Ramsey claims that the steps to the debt snowball strategy are:

Step 1: List your debts from smallest to largest regardless of interest rate.
Step 2: Make minimum payments on all your debts except the smallest.
Step 3: Pay as much as possible on your smallest debt.
Step 4: Repeat until each debt is paid in full.

In theory, by the time the final debts are reached, the extra amount paid toward the larger debts will grow quickly, similar to a snowball rolling downhill gathering more snow, hence the name. A phycological factor is also at play – as you complete your smaller debts, you will embrace the feeling of victory and thus, you will continue to pay off more debt to sustain that feeling until you are financially free.

A study done by the Kellogg School of Management claims that people with large balances are more likely to stick with their debt payoff plan if they focus on smaller balances first.