Anti-Snowball Method to Payoff Debt and Save More Money

Posted by Nick on October 23, 2012

When you have a few (well, maybe more than a few!) credit cards with balances that you carry month to month, you know the frustration of seeing those statements each month with new finance charges added, if you bother to look at the statement at all. I know I don’t want to at times.

There is a method that has been around for a while now called the “Snowball” method of paying down, and eventually paying off, credit card debt. If you’re familiar with it, you know it gives you a boost psychologically by getting smaller debts paid off quicker, then allowing more money to be used for larger debts. However, if you’re more interested in saving on interest payments, there’s another way.

How to Save on Interest with an Anti-Snowball Method

So what is this method? Put simply, it’s a way to align your credit card (and other debts, if you choose) debts in order by interest rate, paying down the highest rate first, then moving down the list until all the debt is paid off. The advantage of this method is that it allows you to pay, in the long term, the least amount of interest.

The Steps

Now that you know what it is, here’s how to implement it:

  1. Gather all of your most recent credit card statements.
  2. Put the cards in order and sort by interest rate.
  3. Change your budget accordingly.

Gather your Credit Card Statements

First things first; get your credit card statements together. The most recent for each is fine. Of course, you can get them online as well, if you’re using electronic statements only (my personal favorite). I’m going to use three imaginary cards: VISA, Mastercard, Discover. Yes, I know, I know. I have the creative genius of Mozart and Rodin rolled into one. Thank you, you’re too kind.

Find out the interest rate on each card. Never mind the balance. Of course, you already know the interest rate on all of your cards, right? (Yes, I can see that bead of sweat forming!) For our imaginary cards, let’s say VISA has an interest rate of 12.99%, Mastercard has 15.99%, and Discover has 9.99%.

Sort by Interest Rate

Now that we have the interest rates in our hands, we put them in order from largest to smallest. So, we have Mastercard with the highest rate, VISA with the next highest, and Discover with the lowest rate. Here’s our list:

  • Mastercard: 15.99%
  • VISA: 12.99%
  • Discover: 9.99%

Change Your Budget Accordingly

Next, we change our payment structure, also known by the technical term “budget.” Let’s say, for our imaginary cards here, the minimum payment on the Mastercard is $20, on the VISA its $35, and on the Discover card, its $32.

Since we want to pay off the card with the highest interest rate first, we pay Discover $32 per month, VISA $35 per month, and the rest of our funds we have available to pay down credit card debt on the Mastercard. In the end, we pay off the card with a 15.99% interest rate first, lowering the overall interest paid over the course of paying off all the cards.

If you want to save even more on interest charges, and are willing to put the work into it, you could pay down the Mastercard until the monthly interest charge, in dollars, is less than that of the VISA, and then start switching the large payments to the card each month with the highest interest charge, instead of the highest interest rate. This will give you the optimum interest charge savings, but is also the most time consuming.

Track Your Progress

What’s a good plan if you don’t get to see your progress? What I like to do if I’m working with this method is to keep track of the balance of the card I’m currently working on. So once again, in our imaginary situation, I would have a chart somewhere visible that I would update each month with the current balance of the Mastercard until it is paid off, and then move on to the VISA. Find a way that helps motivate you to pay off those cards!

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Comments to Anti-Snowball Method to Payoff Debt and Save More Money

  1. You have to have a savings mind-set to use this method. I prefer the anti-snowball over the snowball methode.

    JS Kopchik

    • ‘Tis true, you’ve got to really want to get out of debt as fast as possible for this to work. I’ve tried both methods, and it’s kind of up in the air for me.


  2. This is a great way for people who don’t need the psychological boost to motivate them into saving money on interest charges.

    I would add one step though. After sorting out the statements by interest rate, call each company and ask if they will lower your rate. This only works if you pay on time on a regular basis. Then, re-sort out the statements again. It’s an easy way to shave to few extra percentage points off.

    Don @ MoneySmartGuides

    • That is an excellent idea. I’ve had moderate luck with that myself, although I do pay my cards on time. Some banks, and even credit unions, just don’t seem to care, if you have a large enough balance. Make sure to ask for the “retention” department, and let them know you’ve got an offer for a much lower rate.


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