Debt avalanche vs debt snowball: which should you use?

How each method works

Both methods start the same way. You pay the minimum on every debt, then choose one debt to receive all the extra money you can find. When that debt is gone, you add its old payment to the next one. The only difference is the order.

• Avalanche: list debts by interest rate, highest first. Extra money goes to the top of that list.
• Snowball: list debts by balance, smallest first. Extra money goes to the smallest balance regardless of rate.

The "roll-over" step is what makes either method work. Each time a debt is cleared, its minimum payment joins the extra amount, so the payment aimed at the next debt keeps growing. Your total monthly outlay stays constant.

The example debts

Here are four made-up debts, with a total of $13,700 and combined minimums of $365 a month. The plan adds $300 extra each month, so $665 goes to debt in total.

The figures below come from a month-by-month calculation: interest is added each month at APR / 12, minimums are paid on every open debt, and everything left over goes to the target debt. Real lenders may compute interest daily and have different minimum rules, so your own figures will differ a little.

Side-by-side results

The avalanche saves $759.99 and one month. That gap exists because Card B charges 24.99% and sits at the bottom of the snowball order, so it keeps growing for 26 months. In the avalanche it is attacked first and gone by month 16.

For context, paying only the minimums while rolling freed-up payments forward takes 59 months and costs $7,814.22 in interest. Either method with $300 extra cuts that by more than half. The choice between the two methods is small compared with the choice to pay extra at all.

When the snowball makes sense

The snowball clears the store card in month 3 and Card A in month 9. Closing accounts early means fewer bills to track and a visible sign of progress. Many people find that this momentum helps them stay with a plan, though it varies by person.

It also fits when the smallest debts happen to carry rates close to the largest ones. In that case the snowball costs little extra and feels better. If your balances and rates line up that way, the two methods are close to identical.

When the avalanche makes sense

The avalanche wins when a large balance carries a much higher rate than the rest, as Card B does here. The bigger the rate gap and the bigger the balance at the top rate, the more the avalanche saves. If you are motivated by the numbers and can wait longer for the first payoff, it is usually the cheaper route.

Test your own list in the Credit card payoff calculator. It handles one balance at a time: enter a balance, the APR and a monthly payment to see the months and interest. Run it for the debt you plan to target and compare a few payment sizes. For fixed-term loans, the Loan payment calculator shows the effect of an extra monthly payment.

Where the extra money comes from

Neither method works without extra cash. Start with a budget that shows what is left after essentials. The Monthly budget planner compares take-home income, expenses and a savings target, and shows the surplus or shortfall. If nothing is left, trimming one flexible category or adding a bit of income may be the first step.

Keep a small cash buffer while you pay down debt, so an unexpected bill does not go back on a card. How big it should be is covered in how much to keep in an emergency fund, and the trade-off between saving and paying debt is in save or pay off debt first.

Common mistakes

• Skipping minimums. Late payments bring fees and can raise rates. Pay every minimum on time.
• Not rolling payments forward. When a debt is cleared, move its payment to the next one. Otherwise the plan stalls.
• Adding new balances. New charges on a card you are paying off undo the progress. Pay for new spending in cash or from the budget.
• Ignoring promotional rates. A 0% balance transfer or an expiring offer changes the order. Treat the rate after the promotion ends as the real one.
• Giving up after a slow month. Pick the method you can follow and keep going.

For more on why small payments take so long, read the minimum payment trap and paying off credit card debt faster.

How to choose

1. List every debt with balance, APR and minimum payment.
2. Decide how much extra you can pay each month.
3. If one high-rate balance dominates, lean toward the avalanche.
4. If you tend to lose motivation, or you have several tiny balances, lean toward the snowball.
5. Some people start with a quick snowball win, then switch to the avalanche. That is allowed.
6. Recheck every few months with the Credit card payoff calculator and adjust.

The calculators run in your browser and give estimates. Your lender's statements are the final word on balances and interest.

Frequently asked questions

Which is better, debt avalanche or snowball?

The avalanche usually costs less in total interest. The snowball gives earlier wins. The better choice is the one you will stick with until the debts are gone.

How much does the avalanche save compared with the snowball?

It depends on your balances and rates. In the four-debt example here, with $665 a month in total, the avalanche saved $759.99 in interest and finished a month earlier.

Do I still pay minimums with these methods?

Yes. Both methods pay the minimum on every debt and send all extra money to one target debt at a time.

Can I switch between avalanche and snowball?

Yes. Some people begin with the smallest balance for a quick win and then switch to highest-rate-first.