Final answer:
The debt snowball method involves paying off debts from the one with the smallest balance to the largest, irrespective of interest rates. This approach is signified by quick wins and growing payments as each debt is cleared, leading to a 'snowball' effect.
Step-by-step explanation:
The answer choice that best describes the debt snowball method is c. pay off credit cards in order of balance amount, lowest balance first. The debt snowball method is a debt reduction strategy where you pay off debts in order of the smallest balance to the largest, regardless of interest rate. This method gives you quick wins and can help to keep you motivated as you start to see debts being fully paid off. It's different from the debt avalanche method, which suggests paying off debts with the highest interest rates first to save the most money on interest over time.
For example, let's say you have multiple credit card debts with varying balances and interest rates. According to the debt snowball method, you would make minimum payments on all your cards, but pay additional amounts on the card with the smallest outstanding balance until it's paid off. You then take the amount you were paying on that card and add it to the payments on the card with the next smallest balance, effectively creating a "snowball" effect as your payments toward the remaining debts increase.