Borrowers juggling multiple debts are measurably more likely to eliminate all of them when they start by paying off the smallest balance first, according to peer-reviewed research built on real client records from a debt-settlement firm. The finding, published in the Journal of Marketing Research, traced the effect to a simple mechanism: closing even one small account creates a sense of progress that keeps people going. That motivational boost comes with a trade-off, though, because a separate economics study found the approach can cost borrowers more in interest over the life of their repayment plan.
How closing small accounts predicts full debt elimination
The core evidence comes from a study by David Gal and Blakeley McShane, published in a marketing journal, that analyzed account-level data from clients enrolled with a debt-settlement company. The researchers found that the fraction of individual accounts a borrower closed was a strong predictor of whether that person eventually eliminated all outstanding debt. In practical terms, each small balance wiped out raised the odds of finishing the entire repayment program. The effect held even when the researchers controlled for total debt load, suggesting that the psychological reward of visible progress, not just the dollar amount retired, drove the result.
A Kellogg Insight summary of the Gal and McShane findings put the takeaway in plain terms: progress measured by closing accounts predicts eventual debt elimination. That framing matters because it shifts the conversation from pure interest-rate math to behavioral momentum. A borrower with five accounts who knocks out two small ones early may feel more in control than someone who directs every spare dollar at the highest-rate card but still sees five open balances on the statement. The research supports the idea that for many people, sticking with a plan may matter more than squeezing out every last dollar of interest savings.
The interest-cost penalty that complicates the snowball
The snowball method does not win on pure dollars and cents. A peer-reviewed analysis in an economics journal quantified the pecuniary costs of what the authors call “debt account aversion,” the tendency to target small balances rather than high-rate ones. Borrowers following this pattern sometimes paid more in total interest because they let higher-rate accounts accumulate charges while they focused on cheaper, smaller obligations. The study framed the snowball as a behavioral strategy with a measurable financial trade-off rather than a universally optimal repayment plan.
That tension sits at the center of most debt-payoff advice. The mathematically optimal path, known as the avalanche method, directs extra payments at the highest interest rate first. The snowball method sacrifices some of that efficiency in exchange for quicker psychological wins. For borrowers whose smallest balance is a tiny fraction of their total debt, the cost of that detour is relatively low because the account closes fast and the motivational benefit kicks in quickly. When the smallest balance is a larger share of total debt, the detour takes longer and the interest penalty grows. In other words, the same behavioral impulse that helps people stay engaged can also quietly increase the price of becoming debt-free.
Where the research runs thin on snowball completion rates
The Gal and McShane dataset comes from a single debt-settlement firm, and the sample period predates the current credit environment. No publicly available replication using post-2020 account data has yet confirmed whether the same patterns hold amid higher interest rates, buy-now-pay-later plans, and wider use of digital budgeting tools. The original work also cannot fully disentangle how much of the completion advantage comes from the snowball structure itself versus the intensive coaching and monitoring that often accompany settlement programs.
More recent behavioral finance work has begun probing how people mentally organize and prioritize their debts, but the evidence is still evolving. A newer marketing study on debt framing suggests that the way balances are grouped and labeled can change how consumers perceive progress, echoing the idea that closing discrete accounts feels more satisfying than slowly shrinking a single large obligation. Yet even this line of research stops short of providing a definitive completion-rate comparison between snowball and avalanche strategies in the wild.
As a result, the strongest claims that the snowball “works better” rest on a relatively narrow empirical base. The settlement-firm records show that closing more accounts correlates with finishing a structured program, but they do not prove that any given borrower would fail under an avalanche plan. Likewise, the economics evidence on interest costs makes clear that account aversion carries a price, but it does not show that people who chase mathematical optimality always stick with their plans long enough to realize those savings.
What this means for borrowers choosing a strategy
Taken together, the research points to a practical middle ground. For borrowers who struggle to stay motivated, starting with one or two very small balances can create early wins that make the rest of the journey feel possible. After those accounts are gone, shifting toward an avalanche-style focus on the highest interest rate can limit the long-run cost. The key is to recognize that repayment is both a financial and a psychological project: a plan that looks perfect in a spreadsheet but collapses after three months is not truly optimal.
Until broader, more recent datasets are available, borrowers and advisers will have to navigate this trade-off with incomplete information. The existing studies make one conclusion hard to ignore: visible progress, especially in the form of closed accounts, is a powerful predictor of sticking with a debt plan. The challenge is harnessing that power without paying more than necessary for the motivation it provides.
David M. Keller is a finance writer based in Columbus, Ohio, covering personal finance and consumer-focused economic topics. He earned his degree in journalism from Ohio University and began his career reporting on local business and economic trends for a regional media outlet. Since then, he has contributed to a variety of online publications, focusing on clear, practical coverage of topics such as cost of living, debt, and everyday financial decision-making.
