The debt snowball method is a debt-reduction strategy, whereby one who owes on more than one account pays off the accounts starting with the smallest balances first, while paying the minimum payment on larger debts. Once the smallest debt is paid off, one proceeds to the next larger debt, and so forth, proceeding to the largest ones last. This method is sometimes contrasted with the debt stacking method, also called the debt avalanche method, where one pays off accounts on the highest interest rate first.

The debt snowball method is most often applied to repaying revolving credit – such as credit cards. Under the method, extra cash is dedicated to paying debts with the smallest amount owed.

The basic steps in the debt snowball method are:

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.

The theory appeals to human psychology: by paying the smaller debts first, the individual, couple, or family sees fewer bills as more individual debts are paid off, thus giving ongoing positive feedback on their progress towards eliminating their debt.

In either method, fixing the cause of the debt (this does not include one's home loan^{[citation needed]}) must be addressed, that is balance of income vs spending.

The debt snowball method goal is to motivate the person in debt to continue paying off the debt. There is an emotional reward associated with quickly paying off a small debt, which can motivate people to continue with the plan.

The Debt Avalanche method, in contrast, focuses on paying off highest interest rate first and will result in less payments to interest assuming one follows through with the plan. The small debt, with lower interest rate will stay around longer. The debt snowball method has larger high-interest debts around longer, thus may take more time to pay off.