Snowballing: The fast way to clear credit card debt

With more snow on its way and many of us still trying to clear credit card debts leftover from Christmas, we thought it was the perfect time to talk about snowballing.


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No, we're not talking about the white stuff here. We're talking about an effective way to tackle your credit card debts – fast.

Pay off your debt

The very best way to deal with credit card debt is to shift all of it over to 0% balance transfer card. If you moved your debt to the market-leading Barclaycard Platinum Credit Card with Extended Balance Transfer, you would then be able to enjoy 25 months interest-free on your debt. (Bear in mind there is a transfer 3.2% fee.)

If you need longer to clear your debt, you could use a low APR credit card instead. For example, the MBNA Rate for Life credit card charges 5.9% on balance transfers for the life for the debt. It has a 1.5% transfer fee. Alternatively, the Sainsbury's Low Rate credit card offers 6.95% for the life of the debt and has no transfer fee.

But the major drawback with all of these cards – and others like it – is that you'll need a good credit rating to get accepted. As a result, they are not a suitable option for everybody and you may have to keep your debt where it is. This is where snowballing comes in.

How snowballing works

If you have debt on a number of different cards it can feel like an impossible task trying to clear it. But snowballing is an easy (and organised!) way to tackle it.

To get the ball rolling you need to work out exactly how much debt you have on each credit card and what the representative annual percentage rate (APR) is on the cards.

For example, let's say you have three credit cards.

  • You have a debt of £3,000 on card X which has a representative annual percentage rate (APR) of 20%
  • You have a debt of £5,000 on card Y which has a representative APR of 15%
  • You have a debt of £2,000 on card Z which has a representative APR of 9%

Focus on the card that has the highest representative APR first – in this case, card X at 20%. This is the card that will be racking up the most interest, so it's the one you want to pay off the quickest.

Rather than paying off the minimum repayment each month, throw as much money as you can afford to towards card X.

But don't forget about card Y and card Z. You will still need to make the minimum monthly repayments on these cards, otherwise you'll be charged for missed payments and it could negatively impact your credit rating.

Once you have cleared card X, you can move onto the card with the second highest APR – in this case, card Y at 15%. Again, pay off as much as you can each month, keeping enough aside to pay the minimum monthly amount on card Z.

Once you have cleared card Y, you can move onto card Z. Clear that card and you'll have kissed goodbye to your credit card debts.

How quickly will I be debt-free?

How quickly you clear your credit card debt will depend on the number of credit cards you have, the amount of debt on them and the APRs they charge. But let's stick with the above example to give you an idea.

Let's say all of your cards come with a minimum monthly repayment of 2% of the debt.

  • Card X (at a 20% APR) has a minimum monthly repayment of £60
  • Card Y (at a 15% APR) has a minimum monthly repayment of £100
  • Card Z (at a 9% APR) has a minimum monthly repayment of £40

You keep making the minimum repayments on card Y and Z, but increase your payment on card X from £60 a month to £100 a month. In total you will be paying £240 a month towards your overall credit card debts.

It will take you three years and five months to pay off card X in full.

After this time, you continue to pay £240 off your total credit card debts but redistribute the payments so that £200 is paid to card Y, while you continue to pay £40 a month to card Z.

It will then take you a further one year and five months to pay off card Y in full.

You would then only need to pay off another £209.47 on card Z before you had cleared that one too.

In total, you would clear the debt on your three cards in four years, eleven months. You would also have paid £3,919 in interest. It's a large sum of money but if you didn't pay off the highest interest rate first, it could cost up to £435 more.

The more you can pay off the better

Of course, the more you can put towards your most expensive credit card debt, the better. In the above example, if you were to increase your payment on card X to £150 a month (taking your total monthly payment to £290), you would clear the debt on card X in two years, one month.

You'd clear card Y in another one year, five months and card Z in another three months. In total, you would pay off all of your card debt in three years, nine months. And pay out £2,784 in interest.

But while it's well worth upping your monthly repayments as much as you can, there are some debts that take priority over your credit card debts and these should not be forgotten.

For example, your mortgage or rent is a priority debt because if you don't keep up with your payments, you could ultimately lose the roof over your head. So don't start paying off hundreds of pounds a month on your credit card debts if it means your mortgage payments suffer.

Council tax payments, gas and electricity bills, your TV licence, secured loans and child support should also come first.

You can use the snowballing method on a variety of debts including overdrafts and personal loans. But bear in mind, with personal loans, payments are not flexible and monthly payments are usually fixed – so you won't be able to pay more than this.

Please note: Any rates or deals mentioned in this article were available at the time of writing.

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