Debt snowball vs avalanche comes down to one trade. The avalanche pays the highest interest rate first and costs you less in total. The snowball pays the smallest balance first and clears a whole debt sooner. Run your own debts through both. If the gap in interest is small, pick the one you will keep paying every payday, because the method you abandon in month four saves nothing.
What the debt snowball and debt avalanche methods do
Both methods start the same way. You pay the minimum on every debt, every month, without exception. Then you put every extra dollar on one debt at a time. They only disagree about which one.
lists your debts from the smallest balance to the largest, ignoring the interest rate. The extra money goes to the smallest. When it is gone, its minimum and the extra roll onto the next smallest, so the payment grows as it moves down the list.
lists them from the highest interest rate to the lowest, ignoring the balance. The extra goes to the most expensive debt first, then rolls down the list the same way.
Neither one changes the total you pay each month. They change the order, and the order changes how much interest you pay and when you see a debt disappear.
The same three debts through both methods
Here is an illustration, worked out month by month with interest charged monthly. Three debts:
Say that on top of the minimums you can find another $200, so $625 goes to debt every month.
With the snowball, the store card is gone in month 6. The Visa follows in month 20 and the loan in month 26. Total interest: about $2,651.
With the avalanche, the Visa goes first, in month 17, then the store card in month 19 and the loan in month 26. Total interest: about $2,480.
Both finish in the same month. The avalanche saves about $171. The snowball gives you a paid off card in six months instead of seventeen. That is the whole decision, in numbers, and it is usually closer than people expect.
When the avalanche clearly wins
The gap grows when your most expensive debt is also a large one. A card at 29% carrying most of what you owe costs real money every month you leave it for later, and sending your extra money at a small, cheap balance first lets it grow.
It also grows the longer the payoff takes. Over five years, a few percentage points of difference compound into far more than $171. If the avalanche saves you hundreds or thousands on your own numbers, take it.
When the snowball is the better choice
The snowball wins when the smallest debt is also one of the most expensive, because then both methods pick the same debt first anyway. It also wins when the interest gap is small and you have tried and stopped before.
A paid off account is a visible result. One fewer minimum payment, one fewer statement, one fewer due date to track. If that is what keeps you sending the extra $200 every month for two years, it is worth more than the interest it costs.
Be honest about which person you are. A plan that is cheaper on paper and abandoned in month four costs more than either method finished.
Where the extra payment comes from each payday
Both methods depend on the extra payment, and the extra payment is where most plans fail. "Whatever is left at the end of the month" is usually nothing, because money with no job gets spent.
Decide the amount per paycheck, not per month. If you are paid every two weeks, $100 from each paycheck is the $200 in the example, and the two months a year with a third paycheck give you a spare one to put on the debt. How to divide each paycheck between bills, savings and debt is in how to split your paycheck.
Look at what each paycheck has to cover before the next one arrives, then set the debt payment from what is left. Make the payment on payday, before the money can drift elsewhere. If your card is due on a date that does not line up with your pay, paying a credit card twice a month helps.
Keep a small buffer before you start. Without one, the first car repair goes on the card you are paying off. How big your emergency fund should be covers the starter amount.
Doing this in Cashrou
Add your cards and loans with their balances, rates and minimums, and Cashrou builds a payoff plan. Choose snowball, avalanche or your own order, and it shows the month you will be debt free and what the interest will cost on the way. So the choice between the two methods is a number on your own debts, not a guess.
The minimum payments become bills, so they appear in each pay period they are due. Each payday, the app shows what is left between now and the next payday after the bills still to come, with your buffer held back first.
From that leftover, you decide how much goes at the debt the plan puts first. Pointing it at a card updates that card, and the plan moves with it. Cashrou has no bank connection, so you make the payment yourself; the app tells you how much and where.
