Avalanche Method vs. Debt Snowball Method

October 13, 2020

You’re in over your head in credit card debt. What do you do?

If you keep making the minimum payments you’ll get nowhere and it will cost you a lot of money in interest – we’re talking thousands of dollars in interest. But how do you make heads or tails out of your debt and figure out a way out?

Use one of the two most popular debt payoff methods – debt avalanche or the debt snowball method.

 

What is the Debt Avalanche Method?

The debt avalanche method focuses on your credit card interest. Its goal is to pay off the highest interest credit cards first. This method saves you the most money but takes longer to see any progress.

If you aren’t the type of person that needs ‘quick wins,’ it’s a great way to pay off your credit card debt.

Here’s how it works:

  1. Put your credit cards in order of APR highest to lowest (don’t focus on the balance)

  2. Make the minimum payment to each credit card

  3. Any extra money you have to pay toward your credit card debt pay to the first credit card in line (the highest APR)

  4. Keep paying the extra money to the highest APR credit card until you pay it off in full

  5. Take the extra money and add it to the next credit card in line in addition to the minimum payment you already make

  6. Keep going until you create an avalanche and pay off all credit card debt

 

What is the Debt Snowball Method?

The debt snowball method focuses on your credit card balances, not the interest. This method gives you ‘quick wins’ because you’ll focus on the credit card with the lowest balance first. If you thrive on motivation and need the ‘little wins’ to keep you going, the debt snowball method may be a better choice.

Here’s how it works:

  1. Order your credit card debt by balance smallest to largest (don’t focus on the APR)

  2. Make the minimum payment to each credit card

  3. Pay any extra money you have toward the first credit card in line (the lowest balance)

  4. Keep paying the extra money to the lowest balance credit card until you pay it off in full

  5. Take the amount you paid to the first credit card and add it to the next credit card in line (in addition to the minimum payment)

  6. Keep going until you create a debt snowball and are out of consumer debt

 

The Debt Avalanche and Debt Snowball Method Work Great

Choose the method that resonates with you the most. They are both great programs to help you get out of debt but choose the one you’ll use most consistently, as that is the key.

Use the method that you’ll stick to and won’t give up when you aren’t seeing results as fast as you’d hoped. You didn’t get into credit card debt overnight and you won’t get out of it that quickly either. Patience, consistency, and flexibility are the keys to getting out of credit card debt for good.

Rahul Iyer