How the debt avalanche works
You pay the minimum on every debt and send every extra dollar to the debt with the highest interest rate. Once it is paid off, its payment moves to the next highest rate. Because the most expensive balance shrinks first, less interest builds up over the life of your plan.
When the avalanche saves the most
The gap between avalanche and snowball grows when your rates are far apart, for example a 29% store card next to a 7% car loan, and when the high-rate debt also has a large balance. When rates are close, the two methods end up nearly the same and the snowball's quicker first win may be worth more to you.
Tips to make it work
- Set the extra payment to go out automatically right after payday.
- Keep paying the same total each month even as balances drop.
- If a card offers a lower promotional rate, re-run the numbers: the order can change.
- Avoid new charges on cards you are paying down, or the plan's timeline will slip.