The debt snowball method pays off debts from smallest to largest balance, while the debt avalanche method targets the highest interest rate first. Both strategies work—but one might save you more money while the other could keep you more motivated.
Let’s break down exactly how each method works, compare them side-by-side, and help you choose the right approach for your debt payoff journey.
What Is the Debt Snowball Method?
The debt snowball method, popularized by Dave Ramsey, focuses on paying off your smallest debt balance first, regardless of interest rate.
How It Works
- List all your debts from smallest to largest balance
- Make minimum payments on all debts
- Put any extra money toward the smallest debt
- Once the smallest is paid off, roll that payment into the next smallest
- Repeat until all debts are eliminated
Debt Snowball Example
Let’s say you have these debts:
| Debt | Balance | Interest Rate | Minimum Payment |
|---|---|---|---|
| Credit Card A | $500 | 22% | $25 |
| Credit Card B | $2,500 | 18% | $75 |
| Car Loan | $8,000 | 6% | $200 |
| Student Loan | $15,000 | 5% | $150 |
With the snowball method, you’d attack them in this order:
- Credit Card A ($500)
- Credit Card B ($2,500)
- Car Loan ($8,000)
- Student Loan ($15,000)
Why the Snowball Works
The snowball method leverages behavioral psychology. Quick wins create momentum and reinforce the habit of debt repayment. Paying off that first small debt in weeks rather than months builds confidence that you can become debt-free.
What Is the Debt Avalanche Method?
The debt avalanche method prioritizes debts by interest rate, tackling the highest rate first to minimize total interest paid.
How It Works
- List all your debts from highest to lowest interest rate
- Make minimum payments on all debts
- Put any extra money toward the highest-interest debt
- Once paid off, move to the next highest rate
- Continue until debt-free
Debt Avalanche Example
Using the same debts:
| Debt | Balance | Interest Rate | Minimum Payment |
|---|---|---|---|
| Credit Card A | $500 | 22% | $25 |
| Credit Card B | $2,500 | 18% | $75 |
| Car Loan | $8,000 | 6% | $200 |
| Student Loan | $15,000 | 5% | $150 |
With the avalanche method, you’d pay them in this order:
- Credit Card A ($500) — 22%
- Credit Card B ($2,500) — 18%
- Car Loan ($8,000) — 6%
- Student Loan ($15,000) — 5%
In this example, both methods would target Credit Card A first, since it has both the smallest balance and highest rate.
Direct Comparison: Snowball vs Avalanche
Let’s use a different example where the methods diverge:
| Debt | Balance | Interest Rate | Minimum Payment |
|---|---|---|---|
| Medical Bill | $1,200 | 0% | $100 |
| Credit Card | $5,000 | 24% | $150 |
| Personal Loan | $8,000 | 12% | $200 |
| Car Loan | $12,000 | 5% | $250 |
Extra monthly payment available: $300
Snowball Order (by balance)
- Medical Bill ($1,200)
- Credit Card ($5,000)
- Personal Loan ($8,000)
- Car Loan ($12,000)
Avalanche Order (by interest rate)
- Credit Card ($5,000) — 24%
- Personal Loan ($8,000) — 12%
- Car Loan ($12,000) — 5%
- Medical Bill ($1,200) — 0%
The Numbers
| Metric | Snowball | Avalanche |
|---|---|---|
| Total Interest Paid | $3,420 | $2,890 |
| Months to Debt-Free | 28 | 27 |
| First Debt Paid Off | Month 3 | Month 8 |
The avalanche saves $530 in interest and one month. But the snowball provides a win in month 3, while avalanche users wait until month 8 for their first payoff.
When to Choose the Debt Snowball
The snowball method is your best choice when:
You Need Quick Wins
If you’ve struggled with debt before or feel overwhelmed, those early victories matter more than the math suggests. A $500 debt paid off in two months proves you can do this.
Your Debts Have Similar Interest Rates
When your rates are within a few percentage points, the interest difference becomes negligible. The psychological benefit of small wins outweighs marginal savings.
You’re New to Budgeting
Building the habit of consistent extra payments is crucial. If you’re still working on your budgeting fundamentals, the snowball makes habit formation easier by providing regular positive feedback.
You Have Several Small Debts
If you have multiple debts under $1,000, the snowball can eliminate several accounts quickly, simplifying your financial life and freeing up minimum payments.
When to Choose the Debt Avalanche
The avalanche method makes more sense when:
You Have High-Interest Debt
If you’re carrying credit card debt at 20%+ while also having a low-interest car loan, the math strongly favors attacking the credit card regardless of balance.
The Interest Gap Is Significant
When there’s a 10+ percentage point difference between your highest and lowest rate debts, the avalanche could save thousands of dollars.
You’re Financially Disciplined
If you don’t need external motivation and can stay committed without quick wins, the avalanche rewards patience with real savings.
Your Smallest Debt Is Also Low Interest
If your smallest debt is a 0% promotional balance or low-interest loan, paying it first would be purely psychological—the avalanche protects your wallet.
The Hybrid Approach
You don’t have to choose one method exclusively. Consider these combinations:
Quick Win, Then Avalanche
Pay off one small debt for momentum, then switch to the avalanche method. This balances psychology and math.
Interest Rate Threshold
Use the snowball for debts under 10% interest, but prioritize anything above 10% with the avalanche. High-interest debt is expensive enough to warrant immediate attention.
Balance Threshold
Attack debts under $1,000 with the snowball for quick wins, then switch to avalanche for larger balances.
Making Either Method Work
Regardless of which approach you choose, success depends on these factors:
1. Stop Adding New Debt
Neither method works if you’re adding to the pile. Cut up credit cards or freeze them in ice if needed.
2. Build a Starter Emergency Fund
Keep $1,000-$2,000 in savings so unexpected expenses don’t derail your debt payoff plan. Learn more about how to build an emergency fund that protects your progress.
3. Find Extra Money
Look for ways to increase your extra payment:
- Sell items you don’t use
- Pick up a side gig
- Reduce subscription services
- Negotiate bills
- Apply frugal living tips to free up cash
4. Automate Your Payments
Set up automatic payments for minimum amounts plus your extra payment. Remove the temptation to skip months.
5. Track Your Progress
Whether you use a spreadsheet, app, or paper tracker, visualizing your progress maintains motivation over the months (or years) of payoff.
Frequently Asked Questions
Which method do financial experts recommend?
It depends on the expert. Dave Ramsey advocates for the snowball, while many financial mathematicians prefer the avalanche. Both acknowledge that the best method is the one you’ll stick with.
Can I switch methods partway through?
Absolutely. If you start with the snowball and gain confidence, switching to avalanche can save money on remaining debts.
What about balance transfer cards?
If you can transfer high-interest debt to a 0% promotional card, do it. Then factor the new 0% balance into whichever method you’re using.
Should I pause retirement contributions to pay off debt?
Generally, no—especially if your employer offers a 401(k) match. But you might reduce contributions to the match amount while aggressively paying off high-interest debt. Understanding how compound interest works will show you why maintaining some retirement contributions matters.
What if I can only make minimum payments?
Focus on not adding new debt and look for ways to increase income. Even $50 extra per month makes a difference over time.
Key Takeaways
When choosing between debt payoff strategies:
- Debt snowball (smallest balance first) provides quick wins and psychological momentum
- Debt avalanche (highest interest first) minimizes total interest paid
- The difference in savings is often smaller than expected
- Motivation matters more than mathematical optimization
- Either method beats making only minimum payments
- A hybrid approach can give you the best of both worlds
Your Next Steps
- List all your debts with balances, interest rates, and minimum payments
- Calculate your order using both methods
- Choose the approach that fits your personality
- Find at least $50-$100 extra monthly for debt payments
- Automate your payments
- Track progress and celebrate milestones
Want more guidance? Read our complete debt-free journey tips, learn how long it will take to pay off your debt, or discover strategies for getting out of debt on a low income.
The best debt payoff method is the one you’ll actually follow through to completion. Choose your strategy and start today.
Written by Usman Saadat. Fact-checked by Maira Azhar.