North Carolina residents who are struggling to pay off credit card balances and other bills may have heard of the “debt-snowball” approach made popular by the finance guru David Ramsey. Following a snowball plan involves applying all available funds to the card or bill with the lowest balance while making minimum payments on all other accounts. Once the first debt has been wiped out, the consumer turns their attention to the bill or card with the second-lowest balance. The plan is followed until all debts have been paid off.

The appeal of snowball plans is that they simple and easy to follow. Consumers also tend to remain on them longer because taking care of small debts one by one keeps them motivated. The approach is referred to as snowballing because the amount that can be used to pay off debts increases over time as balances and monthly payments are eliminated.

However, the snowball approach has a number of drawbacks. While the approach is straightforward, it is not usually the most effective way of eliminating debt. This is because only balances are considered when prioritizing debts. Almost all of a credit card minimum payment is made up of interest, which means that paying off the accounts with the highest rates will clear debt more quickly than snowballing even if it does not provide frequent small victories.

The snowball approach is just one of the methods financial experts recommend to consumers who are trying to escape the credit card trap, but studies suggest that these strategies are rarely successful as even a minor financial setback can undo months or even years of hard work. Lawmakers drafted the bankruptcy code to provide Americans with relief from overwhelming debt, and attorneys with experience in this area could explain how filing a Chapter 7 bankruptcy petition offers the possibility of a fresh financial start.