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The Debt Stacking Method

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If you make your debt payments each month, you’ll eventually be debt free … right?

Unfortunately, that’s not always the case. With the average credit card APR now above 20%, interest charges alone can add years to your debt repayment. Plus, if you’re actively accruing debt, there’s a chance you’ll never pay down what you owe.

On the other hand, if you choose (and stick to) a proven strategy like debt stacking, you could create a clear path to eliminate debt.

What Is Debt Stacking?

Debt stacking is a strategy for reducing and paying off debt. With this strategy, which is geared toward eliminating credit card debt, you’ll allocate a set dollar amount to go toward your debt payments each month. Then you’ll make the minimum payments due on each of your debt accounts but pay the extra money toward your highest priority debt.

Once you pay off the first debt on your list, you’ll reallocate your available funds to the second account on your list and continue this pattern until all the debts are eliminated.

There are multiple ways to order and prioritize debt, each with its own name. Two of the most popular stacking methods are called debt avalanche and debt snowball.

  1. Debt avalanche: The avalanche method works by prioritizing debts in order of the highest Annual Percentage Rate (APR). This will save you money on interest charges and help you pay off debt faster.
  2. Debt snowball: This strategy prioritizes the smallest balances and helps you eliminate accounts faster. The idea is that you will gain momentum as each account is paid off in full.

Debt Stacking Example

As an example of how the debt stacking method works, imagine you have $1,000 a month available to pay toward the following credit card accounts:

  1. Mastercard: 25% APR. $1,000 balance, $100 minimum payment.
  2. Visa: 20% APR. $1,200 balance, $150 minimum payment.
  3. AMEX: 15% APR. $2,000 balance, $200 minimum payment.

If you were to make the minimum payments on all three accounts, it would take you 12 months and cost $382 in interest charges to pay off the debt. But with debt stacking, it would only take five months and cost $167 in interest.

Debt Stacking Example: Monthly Payment Amounts

Keep in mind that low-interest, high-dollar debt, like mortgages and student loans, can take decades to pay off, even with this method. It’s OK to include them in your plan, but the main goal of debt stacking is to eliminate credit card debt and other high-interest debt.

Steps for Debt Stacking

To use debt stacking effectively, you’ll have to follow specific steps. We’ve included the necessary steps, plus some tips and guidelines that can help you maximize the debt stacking method and achieve faster debt payoff.

1. Stop Creating More Debt

Maybe it goes without saying, but it’s easier to become debt free when you’re not racking up new credit card debt every month or taking on new loans and lines of credit.

If possible, commit to only making purchases with cash or debit cards while using the debt stacking method. Going this route can help you accurately determine your debt payoff date and reach your goal on time.

2. Rank Debts by Interest Rate and Size

You probably have certain debts you’d like to get rid of right away, like accounts where the creditor offers terrible customer service.

Prioritizing debt according to which is the most expensive, however, is the best way to reduce your interest charges and speed up repayment.

To find the costliest debt, look for the APR shown on your account statement or dashboard. This figure is the most accurate reflection of how costly the debt is since it includes both interest charges and fees associated with the account.

3. Lower Your Interest Rates

Your interest rates may seem like they’re set in stone, but some creditors will lower your credit card interest rates if you ask. Just be sure to do a bit of homework first, like shopping around for better offers, before you give them a call.

4. Create a Strategic Budget

If paying off debt hasn’t been your priority, or if your budget is already tight, it may seem like there’s no room for debt stacking.

Here are a few ways to review your budget and free up cash for your monthly debt payoff goal:

  1. Make a list of all your expenses: Review recent bank and credit card statements to ensure you don’t miss anything.
  2. Cut items you don’t need: Look through your transactions to identify stores you should avoid, non-necessities that can be cut and recurring charges you can cancel.
  3. Pick items to skip temporarily: Find expenses you can go without for a few months or more, like fast food, Lyft, or media subscriptions.
  4. Examine your income: If your income hasn’t increased in the last 12 months, consider negotiating a pay increase or looking for a new job.

After you go through each item on your list, identify how much cash you now have available for debt payments and commit to paying that amount each month.

5. Create a Payment Schedule

With your monthly debt payment amount in mind, decide how much money you can allocate to the first debt on your list. Try using a simple debt payoff calculator to determine when the account will hit a $0 balance. Plan to roll the extra cash over to the next account on your debt stacking list after the first one if paid off.

Pros and Cons of Debt Stacking

The debt stacking method can help debtors tackle credit cards and personal loans, but how does debt stacking work for other situations? Depending on the types of debt you owe, your balances and your budget, it may or may not be your best path to financial freedom.

Pros of Debt Stacking

For many people, adopting a strategy for debt payoff can have big rewards. When it comes to debt stacking, these are some of the main benefits:

  • Set a date for when you’ll be debt free.
  • Pay off debt faster.
  • Track your progress toward a meaningful financial goal.
  • Improve your credit scores as you pay down your debt balances.
  • Save money by paying down high-interest debt first.

Cons of Debt Stacking

In some cases, debt stacking isn’t the best strategy. The drawbacks to this method include:

  • Requires you to have a budget surplus.
  • Other strategies or interventions may be better for reducing interest or balances (e.g. a debt management plan or bankruptcy).
  • High account balances can have long repayment time frames.

Is the Debt Stacking Method Right For You?

Debt stacking isn’t the right strategy for every debtor. If you have a moderate amount of credit card debt, using this method alone can motivate you to prioritize debt payments and help you establish a path to financial freedom. But if any of the following applies, you might want to explore solutions that complement or replace debt stacking:

  • You can’t come up with a surplus in your budget for the extra debt payments.
  • Even with debt stacking, you can’t pay off your high-interest debt within 3-5 years.
  • Your main areas of concern are federal student loan payments or other low-interest debts.
  • You’re eligible for a debt consolidation loan or a balance transfer credit card.

Speak to a Credit Counselor About Your Debt

Debt stacking is just one of a handful of methods for tackling debt. Unfortunately, navigating all of the available options can get confusing, but a nonprofit credit counselor can help.

Credit counselors are there to answer all of your financial questions, from basic inquiries like “What is debt stacking?” and “How does debt stacking work?” to, “What’s the quickest way for me to become debt free?”

When you schedule a credit counseling appointment, you’ll get free or low-cost professional guidance, tools, tips, and advice for addressing all of your financial challenges.

About The Author

Sarah Brady

Sarah Brady is a Personal Finance Writer and educator who's been helping people improve their financial wellness since 2013. Sarah writes for Experian, Investopedia and more, and she's been syndicated by Yahoo! News and MSN. She is a workshop facilitator and former consultant for the City of San Francisco's Affordable Home Buyer Programs, as well as a former Certified Housing & Credit Counselor (HUD, NFCC). Sarah can be contacted via


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