Choose the Debt Payoff Strategy That’s Right for You

Whatever You Choose, at Least You'll Have a Plan

An illustration depicting people taking on a variety of personal finance tasks.

The Balance

The most effective way to pay off your debt is to focus on paying down one debt at a time while making minimum payments on the other accounts. As you pay off accounts, you apply your lump-sum payments to the next debt on your list. While you can prioritize debts any way you’d like, the two most effective methods are the debt snowball method and the debt avalanche method.

We’ve created a Google Sheets spreadsheet (The Balance Credit Card Debt Worksheet) to help you collect your credit card details—and do the math. In addition to summing up debt totals for any cards added to the list, the spreadsheet also calculates credit utilization ratio, an important factor in credit scoring. You can also use the worksheet to help you decide which debt to focus on first.

How the Debt Snowball Method Works

With the snowball method, you pay your debts off from smallest to largest amount due, regardless of interest rate or other account factors. This allows you to pay off small debts quickly, making more progress toward catching up with accounts. Once you pay off one account, roll over that monthly payment to the next account, while continuing minimum payments on your other debts. Repeat the process until all your accounts are paid off.

With the debt snowball method, you’d arrange your debts like this:

Balance Annual Percentage Rate (APR)
$850 22%
$1,400 18%
$3,600 24%
$5,325 14%
With the snowball method, rank your debt by amount, smallest to highest.

You’d start by paying as much as you can toward the $850 credit card balance while paying just the minimum due on the remaining accounts.

How the Debt Avalanche Method Works

The debt avalanche method focuses on paying off your credit card debt starting with the one with the highest interest rate, regardless of the total balance or monthly payment. Similar to the debt snowball method, you focus on paying off one debt at a time, making a large lump sum to one account and minimum payments on your other accounts until you pay off the highest-interest card.

Under the debt avalanche method, here’s how you’d pay off the same balances listed before:

Balance Annual Percentage Rate (APR)
$3,600 24%
$850 22%
$1,400 18%
$5,325 14%
With the avalanche method, rank your debt by interest rate, highest to lowest.

With this plan, you'd start by paying off the debt with the 24% interest rate while making the minimum payments on the remaining accounts.

Which Method Is Right for You?

The debt avalanche method saves money in the long run because you’re getting rid of your more expensive debts first. However, if your highest interest rate debt also happens to be your largest debt, it will take more time to pay off, which can be discouraging.

For many people, the debt snowball method feels more rewarding, especially in the beginning, because you can cross off smaller debts as you pay them off quickly. 

Psychologically, people tend to feel motivated to reduce the total number of debts owed, rather than the total debt amount owed. If you’re having a hard time getting motivated to pay off your credit card balances, the debt snowball could be the better approach for you.

Next Steps and More Resources

Weighing the debt avalanche and the debt snowball method ultimately comes down to whether you want to save money—or get the psychological boost of paying off accounts faster. In the next step, we’ll walk through launching your debt payoff plan. Here are some additional resources to learn more about the two most popular methods of paying off debt: