Under the method, extra cash is dedicated to paying debts with the smallest amount owed.
Since the example omits interest, any payment order could pay off the debts in the same amount of time, but the snowball method avoids long waits between successive payoffs.
If the debtor had prioritized debts in the reverse order, the first payoff (Card A) would have taken ten months and the rest an additional seven.
Several writers and researchers have considered this contradiction between the method and a strictly mathematical approach.
In a 2012 study by Northwestern's Kellogg School of Management, researchers found that "consumers who tackle small balances first are likelier to eliminate their overall debt" than trying to pay off high interest rate balances first.
[9] A 2016 study in Harvard Business Review came to a similar conclusion: We tested a variety of hypotheses and ultimately determined that it is not the size of the repayment or how little is left on a card after a payment that has the biggest impact on people's perception of progress; rather it's what portion of the balance they succeed in paying off.
Ramsey Solutions has done studies that show motivation is more effective than interest rates.
[12] However, they also found that when debtors are restricted from fully paying debts and are shown the interest that will accrue as a result of their choice, they make the mathematically optimal decision.