Debt avalanche vs debt snowball: which pays off debt faster?

Two proven ways to clear several debts, with a worked example showing what each one costs in time and interest.

Both methods start the same way: pay the minimum on every debt, then put every extra dollar toward one target debt. When that debt is gone, add its payment to the next one. The only difference is which debt you target first. The avalanche method Target the debt with the highest interest rate first. This saves the most money, because the most expensive balance shrinks fastest. The snowball method Target the smallest balance first, whatever its rate. You clear a whole debt sooner, and that early win keeps many people going. It usually costs a little more in interest. How to choose Before you start Why minimum payments take so long On a credit card, much of each minimum payment goes to that month’s interest, so the balance barely moves. On $4,000 at 24%, interest alone is about $80 a month. A $120 minimum only takes about $40 off what you owe in the first month. Card minimums are often a small percentage of the balance, so they shrink as the balance shrinks. That feels easier, but it stretches the debt out even longer. Keeping your payment at the same amount, even as the minimum falls, is one of the simplest ways to finish sooner. Staying on track Set up automatic payments for every m…