Avalanche vs snowball: which debt payoff method is actually better

If you have more than one card, you have probably wondered where your extra money should go first. Two methods come up again and again: the avalanche and the snowball. People argue about them like sports teams. Here is what each one does, what the research says, and how to pick the one you will actually stick with.

The short answer

On paper, the avalanche costs less. In real life, the best method is the one you keep doing until the last balance hits zero. For some people that is the avalanche. For others, the quick wins of the snowball are what keep them going. Both are a real plan, and both beat paying only the minimums.

How both methods start

Both methods begin the same way:

1. List every debt with its balance, interest rate (APR) and minimum payment.
2. Decide how much you can put toward debt each month in total.
3. Pay the minimum on every debt, every month, so nothing goes late.
4. Send every extra dollar to one target debt.
5. When that debt is paid off, roll its whole payment into the next target.

That rollover is where the speed comes from. Each payoff makes your next target shrink faster. The only difference between the two methods is which debt you target first.¹

The avalanche: highest interest rate first

With the avalanche, your extra money goes to the debt with the highest APR, then the next highest, and so on. The size of the balance does not matter.

Why it works: interest is charged as a percentage of what you owe. When you pay down your most expensive balance first, less of your money goes to interest over time.

The snowball: smallest balance first

With the snowball, your extra money goes to the smallest balance first, whatever its rate. Then the next smallest, and so on.

Why it works: you close your first account quickly. A card at zero is proof that the plan is working, and that proof makes it easier to keep going.

What the research says

Researchers have studied how people actually pay off several debts, and the results are worth knowing.

• In a set of experiments, people with several debts tended to pay off the small ones first, even when the larger debts had higher interest rates.² So if the snowball feels natural to you, you are not alone.
• A study of nearly 6,000 clients of a debt settlement company found that people who closed out more individual accounts were more likely to finish the whole program, even when the total dollars paid were the same.³⁴
• Another study found that focusing on the account with the smallest balance had the strongest effect on people’s sense of progress.⁵

One honest note: these studies measure motivation and follow-through. They do not change the math. When it comes to interest alone, the avalanche still comes out ahead. The takeaway is that money and motivation both count.

How to choose

The avalanche may suit you if your highest-rate debt is small or medium-sized, the gap between your rates is big, or you get a kick out of watching the interest you are not paying.

The snowball may suit you if you have started a plan before and lost steam, you have a few small balances you could clear in a couple of months, or you want proof soon that this is working.

The simplest test is to run your own numbers both ways, which the free debt payoff calculator does in about a minute. If the difference is small, take the snowball’s quick wins and do not feel bad about it. If the difference is large, the avalanche may be worth the wait.

What matters more than the method

• Pay every minimum on time. A late fee, or a higher penalty rate, can cost more than the gap between the two methods.
• Try not to add new charges to the cards you are paying off, if you can.
• Pick a monthly amount you can keep up. A smaller amount you pay every month beats a bigger one you cannot keep going. If there is nothing left to cut, making more money grows that amount too, and our guide on how to negotiate your salary is a good place to start.
• Check in once a month. Watching the total drop is part of what keeps you going. A debt tracker like the Haluvra debt app counts down the months to your debt-free date, so you can see it move closer.

Whichever method you pick, you are already doing the hard part: looking at the numbers and making a plan.

Sources

1. Consumer Financial Protection Bureau, “How to reduce your debt” (2019)
2. Amar, Ariely, Ayal, Cryder and Rick, “Winning the Battle but Losing the War: The Psychology of Debt Management,” Journal of Marketing Research (2011)
3. Gal and McShane, “Can Small Victories Help Win the War? Evidence from Consumer Debt Management,” Journal of Marketing Research (2012)
4. Kellogg Insight, “To Beat Debt, Consider Starting Small” (summary of Gal and McShane)
5. Remi Trudel, “Research: The Best Strategy for Paying Off Credit Card Debt,” Harvard Business Review (2016)