4 Easy Debt Reduction Strategies – Explained

While you can inch your way out of debt by making minimum payments over the next 50 years, I’m going to guess you’re looking for debt reduction strategies that will work more quickly than that! Well, with the Debt Movement upon us, and being a savvy WSL fan, it’s time to talk about how to pay off debt quickly and discuss some easy debt reduction strategies that you can implement!

Easy Debt Reduction Strategies

1. Snowball Your Debt Payments

debt reduction strategies image

One of the most common (or at least well-known) strategies for debt reduction is the debt snowball method. If you’re a fan of Dave Ramsey then you’ve likely heard of this method, and for many years, it’s one that we implemented here at the WSL house.

The snowball debt reduction strategy entails paying off your debts from SMALLEST to LARGEST. You don’t take interest rates or minimum payments into account, but rather focus on the total payoff amount.

Here is how you implement the snowball debt reduction strategy:

  1. Write ALL of your debts down on a piece of paper (or excel spreadsheet) from smallest to largest total payoff amount. These would include: credit cards, medical bills, student loans, payday loans, car notes, and any loans to family. Do not include your mortgage but consider including a HELOC if it’s less than $20,000.
  2. Make the MINIMUM payment on each debt.
  3. In addition to the minimum payment, the debt snowball method says that you’re ALSO going to pay as much as you can on the smallest debt EVERY MONTH until it’s eliminated! You can use all of your disposable income to pay down debt or a portion of it.
  4. Once the smallest debt has been eliminated (and it’s associated minimum monthly payment), then you start attacking the next smallest debt. Repeat step 3 and 4 until you’re out of debt!

The reason this is called the “snowball” debt reduction strategies is because once you eliminate the smallest debt, you then have that minimum payment to help pay off your next smallest debt. With each debt that’s eliminated, the minimum payments you’re saving begin to add up (or snowball) and you’re able to pay larger monthly payments by the time you get to your bigger debts.

2. Pay Off the Highest Interest Rate Debt, First

While there is no “right or wrong” strategy to reduce debt, each these easy debt reduction strategies are viable options and it’s important that you choose one that works best for you. With that said, mathematically, paying off the highest interest debt FIRST makes the most sense and is likely the most effective of the debt reduction strategies.

Despite that being the case, the debt snowball method is one of the strategies people like because the psychology involved with winning and feeling/seeing progress is extremely motivating! Realistically, you will be able to knock out your smallest debt rather quickly (and therefore feel more motivation as you believe you’re making progress).

However, when you focus on the highest interest rate FIRST, that may also mean you’re stuck paying off your LARGEST debt, first. If that’s the case then it may take you months to finally pay off that debt and it’ll be awhile before you truly feel you’ve accomplished anything. So, psychologically this may not be the best of the debt reduction strategies. However, mathematically, it is.

How to implement the highest interest rate debt reduction strategies:

  1. Write down all of your debts from highest interest rate in descending order to your lowest interest rate. If you’re unsure of how much interest each debt charges, then look at your statements or call the company and ask.
  2. Pay the minimum monthly payments on ALL the debts.
  3. Pay as much extra on the debt that has the highest associated interest rate (in addition to the minimum monthly payment). Continue to do this every month until that highest interest rate debt is gone!
  4. Repeat step #3 for each debt until they’re all eliminated.

3. Debt Consolidation

Debt consolidation is often a misunderstood debt reduction tool, partly because there are multiple ways of doing it and partly because not everybody understands what it is. The reason I’ve included debt consolidation as one of the debt reduction strategies that you should consider is because I used it myself and it was an integral part of helping me reduce my debt.

There are two primary types of debt consolidation: (1) is when a person uses equity in an asset or obtains a new loan and “consolidates” multiple debts/monthly payments into one “new” monthly payment. (2) The second involves working with a debt consolidation company. This company negotiates lower interest rates (on your behalf) and possibly a lower monthly payment. Once you’re in the program, you no longer make individual payments to each of your creditors. Instead, you make one “consolidated” monthly payment to the debt consolidation company and they then pay each of your creditors individually (on your behalf).

Is debt consolidation a good idea depends on which option you choose. In the article I just linked to, we explain very clearly why the first option isn’t a great solution for most people. However, the 2nd method I explained is the one I personally used and I’ve suggested to clients in the past.

Debt consolidation isn’t for everybody though: you may need a larger amount of debt to qualify for such a program and it’s possible that you need to be behind on your payments in order for your creditors to budge on their interest rates. Saying that, I simply encourage you to research a few companies, give them a call, and see what they may be able to do for you.

The GREAT thing about debt consolidation and reduction strategies (once you’re in the program) is this:

  1. Your interest rates are typically lowered.
  2. You make one monthly payment to the debt consolidation company who then pays each individual creditor for you.
  3. You’re not allowed to apply for any further credit (primarily credit cards) while you’re in the program.
  4. You’re not allowed to use the current credit cards that are a part of the debt consolidation – knowing this, it’s often wise to keep one of your smaller cards out of the program so you have at least one card that remains open.
  5. The program generally ensures that you’ll be debt free within 5 years!

While there are some obstacles to debt consolidation, it is generally a decent proposition for both the creditor and the consumer. It’s good for YOU because you get to lower your interest rates, only worry about 1 payment each month, you can’t go further into debt, AND you’re on a 5-year payoff plan (but, with lower interest rates, hopefully you can pay it off faster!!). It’s also good for the creditor because they are promised to get their money back within a specific period of time and they know you’re not out racking up more debt.

4. Use Balance Transfers to Your Advantage

The final of the easy debt reduction strategies involves transferring your high interest rate credit cards to low (or 0%) interest credit cards. Generally, I’d suggest using this method in conjunction with either the debt snowball or high-interest rate debt reduction strategies.

The balance transfer strategy is very easy to implement:

  1. You simply find and apply for the best balance transfer credit cards. There are two in particular that I like: the U.S. Bank FlexPerks® Travel Rewards Visa Signature® card and the Discover-It Card. Each of these cards have no annual fee, 0% interest on balance transfers for 12 months (U.S. Bank Flexperks Signature Visa) or 18 months (Discover-It card), and a small balance transfer fee of 3%. The catch is that they do require great credit to obtain.
  2. Transfer your highest-interest debt over to one of the new 0% cards. Despite there being a 3% transfer fee, if you have a card where you’re paing 8%-20% in interest, then you’re bound to save quite a bit of money over the next year!
  3. By reducing your interest rate, you will also reduce your monthly payment. Instead of spending that extra money, you’re going to use it in one of your debt reduction strategies by either paying as much on this 0% card as possible or using the extra money to add to your debt snowball!

The balance transfer strategy is a great one because you don’t have to do anything and you’re going to save some money (which means you can pay more towards reducing debt!). Please realize though, that this strategy isn’t going to be the only thing that will get you out of debt, you must still couple it with option #1 or #2 above.


There is no “right or wrong” method to pay down debt. What’s important is that you analyze each method, develop a plan and determine which one(s) suite your situation, then implement one these easy debt reduction strategies.

If you’re just starting to focus on paying down debt, I’d suggest utilizing the balance transfer strategy in conjunction with the debt snowball method. Once you’ve eliminated some of your smaller debts (and their monthly payments), then focus on paying off the high-interest rate debts and forgo the snowball method.

Readers: did you have any debt reduction strategies that you used when paying down debt (or currently use)?

Picture by FreeDigitalPhotos.

About the Author

By , on Jul 7, 2013
Andy Tenton
Andy is a 30-something New Yorker who turned his financial life around. He took charge of his finances, got out of debt, and is now working his way toward financial success. He is the publisher of WorkSaveLive.com.

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  1. I’m still trying to decide between the debt snowball and debt avalanche but both require that I pay off the same credit card so I have time to decide.

    I have a question about consolidation – it sounds like you’re talking about consolidation of credits cards. Does this also apply to student loans? I’m heavily researching consolidating my high-interest private student loans but I’m pretty stuck. Will consolidation companies work with me?

    Thanks in advance for your advice!

  2. Mary Slagel says:

    Transferring to a lower interest card is a great idea and definitely saves you money. I have tried the snowball method and it works great because it truly is motivating to see your debt being reduced.

  3. Thomas says:

    I never tried the snowball strategy but I have done the highest balance first and at one point signed up for debt consolidation. The thing with DC was that we thought about it and in the end even though we saved some money we still would be paying so much more than what was owed. I also had a friend who tried it and he stated it showed up on his credit. We decided not to do it and paid them off cash. We were so sick when we had to press the submit button online when make 5-10k payments but it was our mess and we need to clean it up.

  4. Laurie says:

    Thanks, Andy, for the thorough and thought-provoking post. We personally are doing the debt snowball, because, like so many others have said, it’s a mind thing, at least for us. I think knowing how your mind works is key to making the right decision for your particular situation. The great news is that we’ve all got plenty of options to choose from!

  5. Great tips, as always! I have to say that I am not into the debt consolidation route; it never works out for the borrower. If you are serious about snowballing the debt, in a 3-6 months you will find that you MAY get a 0% balance transfer offer in the mail. Then the fun starts. Either way, it is a behavior issue. Grat post!

  6. Great post, I’m definitely in the “mathematical” category looking for the most bang for my buck. That said, I think consolidation is the easiest first step and can often times reduce the overall interest rate (especially if you owe credit cards).

    Have you ever tried Prosper or LendingClub to try and consolidate your debt? I’m curious if they would accept you because the interest rates even for terrible credit scores is actually pretty low!

    • Andy says:

      Hi Andrew! Thanks for stopping by and commenting.

      I actually did get a loan from Prosper about 6 years ago (before they got licensed to fund loans). My experience with them was great and it did provide another alternative for me to reduce my interest rates and monthly payments. Saying that, I think it would be the 5th option on this list and one I’d try to do in conjunction with the first two methods (while trying a true debt consolidation or balance transfer first).

  7. We use all of those except the debt consolidation to get rid of our credit cards. Luckily the highest interest rates were on the lowest amounts, so we killed those first and then when the balance was more reasonable, we put the last of it on a 0% interest card until it was gone. Like you said, it really doesn’t matter, as long as you get going.

  8. Most people tend to give up when they don’t see immediate results. It’s like budgeting when they say “I/we can’t save any money” and I say it’s better to save $1.00 than nothing at all. Just to set up a savings account and to have $1.00 in it one week, then $2 the next and so is exhilarating for some but laughable for others. What becomes routine with a positive attribute motivates people to challenge themselves further. “Maybe I can pay $5.00 extra on that bill if I don’t buy coffee this week” just to see the numbers go down. Yes, psychological but it works. Heck we’ve done it with the mortgage just to get rid of it. I’ve never had any serious debt problems besides paying off everyday bills and a mortgage so I can’t say what the best/least method is but like you say pick the one that is “right” for you. If the snowball method doesn’t work for someone try something else. I can understand why the snowball method would be appealing to some. If getting rid of the smallest balances first turns your money crank then go for it if not then tackle the big guys first. Whatever works. As long as the debt is disappearing and the math makes sense then people can do what they feel is right.

  9. We personally use #2. #4 is a strong contender for us but you never know what will happen and I’d rather deal with the interest rates I know than the interest rates I’d rather not know should something go wrong.

  10. Debt Roundup says:

    I don’t disagree with anyone wanting to use the snowball method. Whatever works. When I chose to pay off my credit cards, I used a dual prong method. I not only paid the highest interest rate (I am a numbers person, so this just works), but I also included the balance transfer game. After each credit card was paid off, the company would send me a 0% balance transfer to come back. Most of the time I did and it worked well for me.

  11. Jose Nieto says:

    Great post Andy, I agree with your posts and find it interesting that there appear to be some conflicting opinions (based on the comments) regarding the snowball method (I’ve also seen it called the Avalanche, tidal wave etc) method. It seems the biggest contention seems to be whether to pay off high interest or low balances first. I would content that “It all depends” on the individual, their personal debt elimination strategy and (I’m sure there will be some controversy on this one) their personality. Yep, personality. Paying off a debt is a motivator, there are some that will benefit greatly from a psychological perspective of seeing a debt being paid off and be motivated to attack the next one in line aggressively. Let’s imagine a scenario where you have $12,000 in debt with a high interest credit card and a balance of $600.00 with a lower interest rate card. If you can knock out the $600 debt in a few months and then focus on the $12,000 debt then why not? Personally it would make me feel better and the $600 debt would no longer be a distraction.
    At the end of the day though the important thing is that you have and stick to a strategy to eliminate your debt. How you focus to target your debts is really a matter of personal preference.

  12. A good summary, Andy. Like you, we consolidated and although it requires discipline and fierce determination (not talking gazelles but tigers here) it does work. As you know we have paid off an almost obscene amount in three years flat :).

  13. I used the balance transfer idea back when I was digging out of credit card debt. Now, I’m doing the highest interest bit with the small amount of student loans I have left. All of these can be adapted for pretty much anyone’s situation

    • Andy says:

      I totally agree and I think a combination of the methods probably work best, however, for starters, I’d encourage the debt snowball method. 🙂

  14. I’ve been debt snowballing, but when I had to get a loan for my medical bills, I decided to keep concentrating on my credit card, even though the medical loan balance was lower.

    For my wife’s medical bills, we opted for debt consolidation with CareOne. Except for the hospital bill, since our local hospital REFUSES to work with any programs. They give you two options. Pay the bill in full by the due date, or get a loan through the bank that has a loan officer in the hospital’s billing office. <– Conflict of interest much?

  15. Pauline says:

    I like the snowball for momentum as well but have lately tried to do what makes the most financial sense, pay higher balances, refinance to lower rates and don’t even pay debt if you can invest at a higher rate. I find the feeling of being debt free wins so started paying debt again!

  16. Mackenzie says:

    I am looking to transfer my card that has a high interest rate to one with 0%. Thanks for the tips Andy!

  17. Jay says:

    Debt is based on mathematics; there is only one right way to pay it off the mathematically correct way, which is to tackle the highest interest rate first. The problem is if everyone did things the mathematically correct way no one would be in debt because you wouldn’t have overspent in the first place. By telling people to pay off their debt as Dave Ramsey does using the snowball method it does not correct the underlying problem which got the person in debt in the first place. If you learn how to deal with the mathematically correct methodology you are less likely to repeat the initial problem as you will know how it happened and you will be debt free for life.

    • Andy says:

      Interesting thoughts, Jay. It is an underlying problem that got the person into the debt, however in order to get out of debt they likely had to live on less than they made which means they probably corrected the underlying issue…

    • Terry says:

      Jay makes a strong point.

      Before sliding that credit card, one should stop and think whether or not the amount can be paid off on the next credit card cycle.

      In my book, there is good debt and there is bad debt.

      I’m in no hurry to pay of mortgage loans that I have on my rental houses, since that is covered by the rent I receive from the tenants. But, I won’t put any luxury items on my card unless I can pay it off right away.

  18. These are all great tips. The snowball method worked for us when we were paying off our debt. We focused on the smallest balances first just for the psychological benefits. Really, as long as you are working aggressively to pay things down….that is all that matters!

  19. Many many years ago when my wife and I decided to straighten up and fly right with our money, we had to pay off many debts/loans! It was crazy. Neither of us knew the term for it at the time, but now I know that how we did it was the debt snowball. We just did what made sense for our little minds. We had so many debts/loans that it was hard to even keep track, and so it made sense to start getting rid of differnt loan companies as fast as possible. The fastest way seemed to be paying off the smallest ones first! So that debt snowball thingy worked great for us. All we have left now is the mortgage!

    • Andy says:

      Congrats TB! I do think that if you’ve never really focused on your finances and need a place to start, then the debt snowball method is the best. After you’ve gotten into a groove and knocked a few out, then I think going with the mathematical approach is the best.

  20. Michelle says:

    Right now I am attacking my debts with the highest interest rates. I still hopefully will have my student loans gone by March or April of this year. Wish me luck!

  21. Great tips Andy. When I was in debt I had my cards consolidated. I went through a reputable agency who consolidated all four into one payment. They were able to get three of the cards down to 0% and the other was somewhere around 5%. I was able to get it paid off in about four years and they only charged me literally like $2/month for mailing expenses. It also did not put a black mark on my credit, not that it didn’t have that already though due to my stupidity. 😉

    • Andy says:

      Great points, John and that is also similar to my experience (although I paid more in fees). It’s amazing what REAL debt consolidation companies do…and to be clear it’s different than debt settlement or refinancing and pulling out equity in your assets.

  22. Personally, the best debt recovery method I know of is to calculate how quickly you can pay the loan off if you change the minimum payment to a bigger payment. When I ran the numbers and saw that I could be debt-free sooner than I thought it motivated me to change. For me it wasn’t a matter of using one technique or another, it was about getting motivated so I HAD to make the change.

    If it can be put off it will – so I made it a priority and then just found the money by making other things a lower priority.

    High interest first makes sense, but the rest run the risk of papering over a bigger problem which boils down to spending more than you earn. Fix that problem and the debt problem will go away.

    • Alex says:

      This is a great motivational strategy. Often, people just want to see that all the hard work they’re putting into paying off debt will have an impact.

  23. I understand that the Dave Ramsay debt snowball method is popular and that paying off the smallest amount of debt first gives you a buzz as you completed a goal, but I think it’s a dumb way to go about it.

    As you say, the high interest is the killer, it is simple maths. I really hate hearing about that debt snowball stuff as I think it is sending the wrong message.

    • Glen, I agree and disagree at the same time. Financially I agree 100%, it is not the preferred method because you pay more interest which is why I like to do both consolidation and then snowball after. But psychologically I disagree as there is something mental with seeing success that makes people successful in using the Dave Ramsey method. Success breeds success , I guess.

      • Andy says:

        I’m 100% with you Andy…I’m not sure I could have ever turned my financial situation around if I would have attacked the highest-interest debt first. I mean if I would have focused on the highest-interest method, after my small credit cards were paid off I would have focused on paying off a $20,000 student loan as opposed to 4 different loans that were $1500/each. That would have been pretty depressing and I wouldn’t be surprised if I would have given up. Whereas paying off those smaller debts made me feel like I was winning and helped to propel me to keep going.

      • Alex says:

        I do have to agree on the psychology. I think that while the highest interest rates are the best ones to pay off first in the mathematically perfect solution, it was psychology, and not math, that got most people into debt. If people don’t need the debt snowball for motivation, they should definitely skip it. But if they need motivation to pay off debt, it is one option.

    • Andy says:

      Glen, I agree with you in terms of the mathematical approach, but I’ve also coached enough people over the years to know that getting out of debt (especially after struggling severely with money for years) is more psychological than anything else. If you’re unable to see/feel progress, it’s very easy to quit and believe things aren’t changing because the minor amount you’re able to pay off each day isn’t making much of a dent in your massive pile of debt.

    • Glen have to agree with you on this one completely. My debt repayment plan looks something like this.
      1. Call and negotiate your interest rate.
      2. Use balance transfer to pay down the highest APR debt first.
      3. Go to peer to peer lending to get a consolidation loan if you can get a lower rate.
      4. Start paying the highest APR debt.

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