The 'debt snowball' and 'debt avalanche' might sound gimmicky, but they're both highly effective strategies to get out of credit card debt

Nancy Bauer/Shutterstock.comThe debt snowball and debt avalanche are two strategies to get out of debt.
  • Because of their high interest rates, it can be hard to figure out where to start when you want to get out of credit card debt.
  • Many families turn to the “debt snowball” method to repay their debts, which tackles small balances first. The “debt avalanche method,” on the other hand, focuses on the balances with the highest interest rate first.
  • While people have their preferred methods, either debt repayment method can make a big difference, and either is significantly better than letting debt grow.

In August 2018, Value Penguin examined data from the US Census Bureau and the Federal Reserve and found that more than 40% of all US households carry credit card debt, with the average American household carrying a balance of $US5,700.

In some states like Alaska and Wyoming, where average household credit card debt is $US13,048 and $US11,546 respectively, many people are simply drowning in credit card bills.

With the average credit card APR now nearing 18%, it can seem impossible for consumers to keep up with interest charges and make a sizeable dent in their balances each month.


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That’s where debt repayment strategies come in – specifically, the popular “debt snowball” and “debt avalanche” methods. In each method, you prioritise your debts to pay off certain liabilities faster, although they go about it in a different way.

They both begin the same:

  1. Write down exactly how much debt you have, along with the interest rate on each account. If it’s unclear from your credit card statements, you might want to make a few phone calls to be sure.
  2. Figure out how much income you bring home each month, and where that money is going currently.
  3. Decide where in your budget you’re going to find some money to put toward your debts. Most people using these methods look for ways to cut spending, to free up more cash for the snowball or avalanche.

Now, choose a method to destroy your debts – once and for all.

The debt snowball crushes the smallest debts first

With this method, you’ll make a list of each of your debts, their amounts, and their interest rate, then figure out how much money you can allocate to debt repayment every month.

Once you have those figures ready, you’ll strive to pay the minimum payment on all your debts except for the smallest one. On that debt, you’ll pay whatever’s left in your allotted debt repayment fund for the month – as in, however much you can.


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Here’s an example of how it could work if you had the following debts:

  • Credit card 1: $US12,000 balance at 17% APR with a minimum payment of $US360
  • Credit card 2: $US7,000 balance at 15% APR with a minimum payment of $US210
  • Credit card 3: $US1,000 balance at 12% APR with a minimum payment of $US45
  • Personal loan: $US3,000 balance with a 7% APR, minimum payment of $US100

If you had the debts outlined above, you would pay the minimum balance on credit card 1, credit card 2, and your personal loan.


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Then you would throw all your extra money for debt repayment toward your smallest balance – credit card 3 – and continue doing that for however long it takes to make that debt disappear. Once that debt is gone, you move on to your next smallest debt: your personal loan, even though it carries a lower interest rate than your remaining credit cards.

Why people choose the debt snowball: It’s incredibly satisfying to cross debts off the list! The debt snowball comes with a feeling of accomplishment as you crush your debts from smallest to largest. Some people might notice that if you run the numbers, the debt snowball isn’t necessarily the most cost-efficient way to pay your debts, since your most expensive debts (those with the highest interest rates) might not be first priority.

That’s why the debt avalanche exists.

The debt avalanche tackles the most expensive debts first

The debt avalanche works the exact opposite way of the debt snowball. Instead of prioritising your smallest debts first, you’ll prioritise your highest interest debts in order to maximise your savings on interest.

Let’s use the same example from above. Your hypothetical debts are:

  • Credit card 1: $US12,000 balance at 17% APR with a minimum payment of $US360
  • Credit card 2: $US7,000 balance at 15% APR with a minimum payment of $US210
  • Credit card 3: $US1,000 balance at 12% APR with a minimum payment of $US45
  • Personal loan: $US3,000 balance with a 7% APR, minimum payment of $US100

Again, you’ll start by making the minimum payment on all of your loans: the personal loan at 7% APR, the $US1,000 credit card balance at 12% APR, and the $US7,000 balance at 15% APR. Then, you’ll concentrate the rest of your allotted debt repayment funds toward one account: the one with the highest interest rate.


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Instead of starting with credit card 3, the smallest balance, you’d start with credit card 1, which has the highest interest rate (17%).

Why people choose the debt avalanche: Since you’re prioritising debts with the highest interest rate, this method is the mathematically efficient option and the one that will save you the most money on interest. Since you aren’t tackling your smallest debt first, it might take longer to crush your first debt and get the feeling of accomplishment that comes with it.

If you’re struggling to decide between the debt snowball and the debt avalanche method, don’t overthink it too much. Either strategy would leave you much better off than doing nothing at all – the most important thing is to start.


If you’re considering taking a personal loan to get a head start on your credit card debt, take a look at these offers from our partners:

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