Debt: Avalanche vs. snowball — which method is right for you?

Two strategies. One saves more money. The other saves more motivation. The best one is whichever you'll actually stick to.

Why the method matters more than you think

Most people with multiple debts do the same thing: make minimum payments everywhere, then put whatever's left over toward whichever debt feels most pressing that month. This approach has a name: it's called the random method, and it's the slowest, most expensive way to get out of debt.

A structured payoff strategy — any structured strategy — beats randomness. The question is which one to use. The two most proven approaches are the debt avalanche and the debt snowball, and they're based on two very different ideas about what motivates people to change financial behaviour.

The avalanche method: mathematically optimal

The avalanche works like this: make minimum payments on all your debts, then direct every extra dollar toward the debt with the highest interest rate. When that's paid off, roll the entire payment to the next highest rate. Repeat until all debts are gone.

The logic is pure arithmetic. High-interest debt compounds against you faster than low-interest debt. Eliminating it first minimises the total interest you pay over the life of your debts. In most real-world scenarios, the avalanche saves hundreds to thousands of dollars compared to any other order.¹

The catch: your highest-interest debt might also be a large one. You could make extra payments for months before you see a balance actually disappear. For people who need visible progress to stay motivated, the avalanche can feel like running on a treadmill — the numbers improve, but the debt count stays the same.

The snowball method: psychologically powerful

The snowball takes the opposite approach: ignore interest rates entirely and target your smallest balance first. Make minimum payments everywhere else, attack the smallest debt with everything you have, and when it's gone, roll that payment into the next smallest.

The mathematics are worse. You will almost always pay more total interest with the snowball than with the avalanche.² But the psychological payoff is real and well-documented. Research from Harvard Business Review and the Kellogg School of Management found that people who focus on paying off small balances are more likely to eliminate their debt entirely than those who target high interest rates.³ The act of closing out an account — fully, completely, gone — creates momentum that keeps people on track.

The snowball method's insight is that debt payoff is a behaviour change problem, not just a mathematics problem. The best strategy is the one you maintain for years, not the one that's theoretically superior.

Which one should you choose?

There are some situations where the choice is clear. If you have a credit card at 28% APR sitting next to a student loan at 4%, the interest rate difference is so large that only a very quick snowball win would justify starting with the student loan. In these cases, avalanche wins decisively.

If your interest rates are clustered close together — say, three cards all between 18% and 22% — the mathematical difference between methods is much smaller. A few months of snowball motivation might be worth the modest extra interest cost.

A useful rule of thumb: if you have a debt at more than 15% APR, that debt should almost certainly come first regardless of its balance. Between 8–15%, the mathematical difference between methods is smaller and the choice is more personal. Below 8%, you may want to consider whether investing — rather than accelerating repayment — makes more sense altogether. The good debt, bad debt article explores that question in depth.

Making either method work

Whichever you choose, the same principles apply:

• Automate your minimum payments — missing a minimum while focusing on your target debt erases the benefit of the strategy entirely. Set every minimum to auto-pay so it never requires a decision.
• Find your extra payment — the strategies above assume you have something extra to apply. Even $100/month above minimums makes a substantial difference to your debt-free date. If you're not sure where to find it, your AI coach can help.
• Don't open new debt while paying down old debt — the avalanche and snowball only work on a fixed or shrinking total. Adding new balances resets progress.
• Celebrate payoffs — when a balance hits zero, take a moment. The snowball method makes this automatic; avalanche users sometimes need to make it intentional.
• Roll the full payment immediately — when a debt is gone, the freed payment goes directly to the next target that same month. Don't let it disappear into spending.
• Consider consolidation if rates are high — if multiple debts are above 20% APR, a consolidation loan at a lower rate can reduce the total interest burden regardless of which method you use. Your AI coach can help you think through whether this makes sense.

The 100 Great Years perspective

Debt has a compounding cost that works against everything the platform stands for. Money you're spending on interest is money not compounding in your favour — every pound or dollar of high-interest debt is quietly working against your financial independence timeline.

The good news: debt payoff is one of the few areas of personal finance where the right action produces guaranteed, tax-free returns equal to the interest rate. Paying off a 22% credit card is a 22% guaranteed return. No investment can match that risk-adjusted. Clearing your consumer debt isn't just financially important — it's the foundation that makes everything else in your financial journey possible.

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This article is for educational purposes only and does not constitute financial advice. Past performance is not a reliable indicator of future results. Always consider your personal circumstances and consult a qualified financial adviser before making investment decisions.