Debt Snowball vs. Avalanche: Which Payoff Plan Fits You

The debt snowball and the debt avalanche work the same way except for one thing: the order. With both, you pay the minimum on every debt, put every extra dollar toward one target debt, and when that debt is gone, roll its payment into the next one.

• The snowball goes after the smallest balance first.
• The avalanche goes after the highest interest rate first.

The avalanche usually costs less in interest. The snowball usually gets you to your first paid-off account sooner. Which one fits you depends on what will keep you making payments a year from now.

How the debt snowball works

1. List your debts from smallest balance to largest. Ignore the interest rates for now.
2. Pay the minimum on everything.
3. Put any extra money toward the smallest balance.
4. When it’s paid off, add its whole payment (the minimum plus the extra) to the next smallest debt.
5. Keep going until the list is empty.

The payment grows as it rolls down the list, which is where the name comes from. Small balances disappear fast, so you get to cross something off early, and you have fewer bills to keep track of each month.

How the debt avalanche works

1. List your debts from highest interest rate (APR) to lowest. Ignore the balances for now.
2. Pay the minimum on everything.
3. Put any extra money toward the debt with the highest rate.
4. When it’s paid off, roll its full payment into the debt with the next highest rate.
5. Keep going until the list is empty.

Because your extra money always goes where interest is piling up fastest, you pay less interest overall. The tradeoff is that if your highest-rate debt is also a big one, it can take months before you pay anything off completely.

The same debts, both ways

Here’s a hypothetical household with four debts. The numbers are made up but realistic.

Debt	Balance	APR	Minimum
Store card	$600	24%	$25
Medical bill	$1,200	0%	$50
Credit card	$4,000	22%	$100
Car loan	$8,000	7%	$250

The minimums add up to $425 a month. Say this family finds an extra $200 in their budget, so they put $625 a month toward debt in total. To keep the comparison fair, assume the payments stay the same every month and nothing new goes on the cards.

The snowball order is store card, medical bill, credit card, car loan. The avalanche order is store card, credit card, car loan, medical bill. The store card comes first either way, since it has the smallest balance and the highest rate.

Here’s how it plays out, with interest figured monthly:

• Both methods clear the store card in month 3.
• With the snowball, the medical bill is gone by month 7, the credit card by month 18, and the car loan by month 25. Total interest comes to about $1,690.
• With the avalanche, the credit card is gone by month 17, the medical bill by month 24 (its minimum payments alone finish it off), and the car loan by month 25. Total interest comes to about $1,510.

Both plans finish in month 25. The avalanche saves about $180 in interest. The snowball gives this family a second paid-off debt in month 7, ten months before the avalanche does.

That’s a fairly typical result. The gap in interest gets bigger when you have a large balance at a high rate, and smaller when your rates are close together or your balances are small. In both plans, the real savings comes from paying more than the minimums. If this family paid only the $425 in minimums each month and never rolled payments over, the credit card alone would take about six years to pay off.

Pick the snowball if

• You’ve tried to pay down debt before and lost steam partway through.
• You have several small balances that are cluttering up your month with due dates.
• Your interest rates are fairly close together, so the order doesn’t change the cost much.
• Crossing something off a list keeps you going.

Motivation is a real factor here. A plan that costs a bit more but that you finish beats a cheaper plan you give up on in month five.

Pick the avalanche if

• You have one balance with a much higher rate than the rest, like a credit card at 25% next to a car loan at 6%.
• Your highest-rate debt is also a large one, so the interest it adds each month is significant.
• You’re comfortable waiting a while for your first payoff, as long as you can see the balance going down.
• Saving the most money is what motivates you.

A middle path

You don’t have to pick one method and stick to it exactly. Plenty of people use a mix:

• Pay off any very small debts first for a quick win, then switch to the avalanche for the rest.
• Use the avalanche, but bump a debt up the list if it’s close to being paid off.
• Pay off a debt early if it has a promo rate ending soon, even if it’s not next in line.

Some store cards and medical financing plans use deferred interest. If you don’t pay off the full balance by the end of the promo period, they can charge you all the interest that built up from the start. A “0%” balance like that can be more expensive than it looks, so read your statement and note the end date.

What makes either method work

Whichever order you choose, a few habits keep the plan from stalling.

Stop adding to the pile

Put the cards somewhere out of reach, and take them off your phone and saved shopping accounts. Paying down a card while still using it slows everything down.

Keep paying every minimum

Missing a payment can bring late fees and, on some cards, a higher penalty rate. Set up autopay for the minimums so nothing slips while you focus on your target debt.

Keep a small cushion

A few hundred dollars set aside means a flat tire doesn’t go right back on a credit card. Some families pause their extra payments for a month or two to build this first.

Roll over the full amount

When a debt is paid off, it’s tempting to let that freed-up money go back into everyday spending. Send all of it to the next debt.

Track your progress where you’ll see it

Seeing the balances drop, whether that’s on a chart on the fridge or in a spreadsheet, makes it easier to keep going. The Debt Payoff Planner is a Google Sheet where you list your debts and choose snowball or avalanche, and it shows your debt-free date and a payoff chart.

Next steps

If you’re ready to start, this guide to making a debt payoff plan in one evening walks through each step, from gathering statements to setting up autopay. To find extra money for your payments, it helps to plan around your pay schedule with a bi-weekly budget. There’s more on this topic in the debt payoff section.

If your minimums already take up more than you can pay, or you’re getting collection calls, a nonprofit credit counselor can look at your situation and talk through your options.