Avalanche vs Snowball: Which Strategy is Best?
The debt avalanche method prioritises paying off debts with the highest interest rates first, while making minimum payments on all others. Mathematically, this is the optimal strategy — it minimises the total interest you pay and gets you debt-free in the shortest time possible. If you have a credit card at 22.9% and a personal loan at 9.9%, the avalanche method directs all extra payments to the credit card first.
The debt snowball method, popularised by financial author Dave Ramsey, takes a different approach: pay off the smallest balance first, regardless of interest rate. The psychological benefit is significant — clearing a debt entirely provides a sense of achievement and momentum that keeps people motivated. Research suggests that the snowball method leads to higher debt payoff completion rates, even if it costs slightly more in interest.
The right strategy depends on your personality. If you are disciplined and motivated by numbers, the avalanche method will save you the most money. If you need quick wins to stay on track, the snowball method may be more effective for you in practice. Either strategy is far superior to making only minimum payments, which can keep you in debt for decades and cost many times the original balance in interest.