Debt Stacking

The debt stacking method can dramatically reduce the time it takes to pay off debt. Learn how to use the debt stacking method to become debt free faster.

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Paying down credit card debt should be simple, right? Pay the bill every month and watch the balance shrink.

But it doesn’t always work that way. Sometimes, balances barely budge, or they even get bigger, while payments get harder to manage.

Millions of Americans are in that boat. Credit card debt rose at a higher rate in 2022 than it had for 20 years. The fact that delinquency began to inch up as well is proof that debt relief isn’t simple.

That doesn’t mean that it’s impossible, however. A focused strategy like debt stacking can eliminate debt. It’s a debt management method that, done right, will result in you being debt-free.

With debt stacking, you line up your debt, most effectively from highest interest rate to lowest, then target one account to pay off, while still making payments on the others. Once the targeted account’s balance is zero, you target the next one. Repeat the process until you are debt free.

Debt stacking works, but only if you stop accumulating debt. Once completed, you will be debt-free and looking at a solid financial future.

What Is Debt Stacking?

Debt stacking is a debt management strategy that focuses on efficiently targeting multiple accounts, one at a time, while still making payments on all accounts. As account balances disappear, the amount of money available to attack your next debt increases, and debt disappears faster.

The debt stacking method isn’t complicated. Here’s how it works:

  • You budget one large payment monthly for all of your debt
  • Choose which account to target first, and make large payments to that account
  • Make minimum payments on others
  • When the targeted account has a zero balance, you target the next account to pay off
  • Since you have one less bill to pay, you now have more money to apply toward the remaining debt.

It’s a tried-and-true method that’s used by nonprofit debt management plans, like those offered by InCharge Debt Solutions. It’s also a proven Do It Yourself way to become debt-free.

Credit card debt is the most common debt among U.S. consumers, and also has the highest delinquency rate of any type of debt. More than half of American adults have at least two credit cards, and 13% have five or more. If you have multiple credit cards, it may feel as though you’re constantly paying credit card bills, but never eliminating the balances.

The debt stacking method makes managing multiple credit cards easier, gives you budgeting focus – saves a huge amount of money in interest! – and results in you being debt-free.

Every month you budget an amount that covers all of your monthly debt payments, with some extra debts added in. You then choose which debt to target. While mortgages, car payments and student loans can be included in debt stacking, the focus should be on credit cards, since they have the highest interest rates, no set payoff term and can cost you three or four times what you originally owed if balances aren’t reduced.

Debt stacking can mean either targeting the card with the highest interest rate, or the one with the lowest balance. We’re going to focus on a strategy that targets the cards based on the highest interest rates (we call it the debt wrecking ball) because it saves far more money in the long run than targeting the smallest balance first, like the debt snowball method).

There are competing schools of thought on debt snowball vs. debt wrecking ball (also called debt avalanche), regarding which is the best debt stacking method.

Debt snowball is thought to have a psychological edge. As you see a balance disappear and your debt relief “snowballs,” you get excited and motivated to keep going.

Debt wrecking ball, though, is far more effective in reducing debt faster. High-interest debt grows faster and costs you much more money in the long run. By targeting high-interest accounts, you’re focusing first on the debt that’s doing the most damage to your finances. If you need convincing, take a look at the section of your credit card statement that shows how much you will pay if you only make minimum payments, and how long it will take to pay it off. It’s the interest that causes that balance to explode.

Debt stacking works well for people who have at least one high-interest credit card, particularly if they use the wrecking-ball method.

Even those who choose the snowball method will find debt stacking is a good way to manage payments on several credit cards and work effectively toward eliminating debt.

How to Use Debt Stacking to Pay Off Debt

Using debt stacking to pay off credit card debt means understanding your debt and your finances in general. You must become familiar with the interest rates, fees and balances on all your accounts, as well as create a realistic and accurate monthly budget to deal with them. That personal finance knowledge is the key to making debt stacking work.

With that in mind, let’s take a deeper dive into debt stacking strategy.

Stop Gaining New Debts

You won’t become debt free unless you stop accruing debt. When you start debt stacking, it means you won’t be taking out personal loans, getting new credit cards or buying anything on credit. You will stop using the credit cards you are paying down. If you have to, remove the temptation altogether by cutting up the cards.  You can also freeze them in a large container, so you’ll have to thaw them out to use them, which will give you time to reconsider a purchase. Since shopping online doesn’t require a physical card, you must also freeze the card digitally. Most credit card websites allow you to freeze or pause a card without closing the account. If you have cards saved on your browser or phone that automatically come up when you buy something online, disable that function. Rethink the idea that you “have to” use your cards to buy groceries, gas, pay utility bills or other necessities. That’s only making your debt worse, and it’s where a good budget comes in.

Create a Budget

To make a budget, write down your monthly take-home income and all necessary expenses (mortgage or rent, utilities, insurance, car loan, etc.), including minimum payments for your credit cards.

Compare that number to your income and you will know how much money, if any, you have left over each month. Combine your debt accounts into one payment and add in some extra money. This should be a payment number that you can manage within your budget and that number should remain the same every month. A budget’s function is to make sure you live within your means. If your expenses are higher than your income, find ways to cut expenses. You can also find ways to add income, but cutting expenses is easier and more immediate.

List Debts by Size and Interest Rate

Make a list of all of your debts, including their balance and the interest rate. Sort them twice, once by balance owed and the other by interest rate, highest to lowest.

The second list would look like this:

  • Credit card 1: $4,275 balance, 22% interest rate
  • Credit Card 2: $490 balance, 19%
  • Student loan: $13,000 balance, 6%
  • Auto Loan: $2,000 balance, 4.25%
  • Mortgage: $99,000 balance, 3.5%

Your debt stacking strategy, using the wrecking-ball method, would be to pay off the 22% interest rate card first, then move on to the 19% card. If you use the snowball method, you’d pay off Card 2 first, since the balance is so low. But that means that Card 1 is still accumulating a lot of interest on that big balance. Ouch.

Ask for a Lower Interest Rate

Call each credit card company and ask for a lower interest rate. If you’ve paid on time and have a decent credit score, they probably will do it. This is the debt stacking strategy used by nonprofit debt management companies, which work with credit card companies to lower interest rates. Individuals can do it, without the backing of a credit agency. Your record on paying and how maxed-out your card is will count. The better you manage credit, the more likely they are to lower your rate. If any of the credit card companies agree to a lower rate, adjust your list accordingly.

Make Your Monthly Payment

The budget and debt list gives you the tools to begin debt stacking. You’ve budgeted a monthly sum that is the total of all your debt payments, with some extra money added in. Target the account with the highest interest rate for a payment that includes the extra money and make minimum payments on the other accounts. Once the targeted account is paid off, target the one with the next-highest interest rate. You now have more money to use, since one card is paid off. Do not decrease the amount you’ve budgeted monthly for debt stacking. Keep making payments, targeting each account in turn, until you’re debt-free.

Pros and Cons of Debt Stacking

Debt stacking works, but that doesn’t mean it’s the best debt-elimination method for everyone. How much debt you have, your income, even your psychological makeup, have an effect on whether you can successfully complete it. If you aren’t comfortable with debt stacking, or can’t manage it financially, then you likely won’t stick with it.

Weigh the pros and cons before you consider it:

Pros of Debt Stacking

  • The wrecking-ball (or avalanche) method, saves more money and pays off debt faster than other debt relief methods
  • Both wrecking-ball and snowball pay off debt faster than making minimum payments, random above-minimum payments, or other non-strategic DIY debt relief methods
  • Deck stacking provides a framework to organize finances, focus on paying debt and cutting expenses

Cons of Debt Stacking

  • Wrecking-ball stackers may lose motivation early on as satisfactory results are slow to appear
  • Snowball stackers will pay more in interest and take longer to pay off the debt
  • It can be hard to break the credit card habit
  • Even though it pays off debt faster than other methods, it may be several years before you’re debt-free

Should You Use the Debt-Stacking Method?

If you have credit cards with high interest, the debt avalanche stacking method is a good fit. It requires sticking to a budget and focusing on the end result, but it’ll save you a lot of money and you’ll be debt-free.

If you have a lot of credit cards and have trouble managing payments, but aren’t sure about debt stacking, start off with the debt snowball method for a motivation boost. Seeing the balance on a credit card disappear can spur you on. Just keep in mind that the card with the high interest rate is still accumulating interest as you make minimum payments.

You can switch between wrecking ball and snowball. The key is to keep targeting accounts and paying them off.

That said, all some people need to get their credit card bills under control is a good budget. An accurate accounting of how much money you have coming in vs. your monthly expenses can clarify what you need to do to pay off a credit card, or several.

Another DIY debt management option is to ask your creditors for lower interest rates. If you have a good history and high credit score, they should agree. The lower payments that result may make it easier to pay more than the minimum on your cards and pay them off without debt stacking.

If your debt is too much for you to manage alone, it’s time to seek help.

Additional Debt Relief Options

If you need help with debt relief, a credit counseling agency like InCharge Debt Solutions can provide options.

Financial resources offered by nonprofit credit counseling agencies include:

  • Credit counseling, which is free, and includes a review of your finances as well as discussion of financial resources and debt relief options.
  • Debt consolidation, also known as a debt management plan, is a debt stacking program in which you end up debt-free in 3-5 years. The counselor works with your creditors to lower interest rates and monthly payments. You make one monthly fixed payment to the company, which pays your creditors an agreed upon amount.
  • Credit card debt forgiveness. Some nonprofit credit counseling agencies in 2021 began offering credit card debt forgiveness, in which you pay 50%-60% of what’s owed in a 36-month program. There are strict qualifying requirements, and since it’s a new program, not all creditors participate.
  • Review of other debt relief options, such as for-profit debt settlement, debt consolidation loans and bankruptcy.
  • Free financial education, budgeting advice, direction on where to find help with housing and utility payments, and more.

Talk to a Professional about Reaching Your Financial Goals

There is no downside to talking to a nonprofit credit counseling agency if you need debt help. Whether you are overwhelmed with credit card debt, or just looking for a way to reduce monthly bills, the counselor can help you review your options.

The counseling session, usually over the phone, is free. The counselor will go over your finances, help you create a budget and offer financial education resources. The discussion will also include a review of debt-relief options, including debt management plans, debt consolidation loans, debt settlement, nonprofit debt settlement and bankruptcy.

Nonprofit credit counselors are required by law to give you advice that’s in your best interest, not push you to buy their company’s product. In reviewing debt-relief options, your situation will be taken into account and the counselor will help you determine which solution is best.

You won’t be judged or criticized for choices you’ve made. The focus will be on how to eliminate debt and strengthen your finances.

Looking at your financial situation and debt through a clear lens will help you decide if debt stacking, or some other debt-relief method, is what you need to become debt-free.

About The Author

Maureen Milliken

Maureen Milliken writes about personal finance and debt relief topics for InCharge Debt Solutions. She started as the “Business Beat” columnist for the now-defunct Haverhill (Mass.) Gazette and has been writing about finance, real estate and business for more than 30 years. She also is is the author of three mystery novels and two nonfiction books.


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