Debt Snowball vs. Debt Avalanche: A Fair Comparison

Two methods, one habit

Both methods ask the same thing of you: pay at least the minimum on every account every month, then send every spare dollar to one chosen debt. The only difference is which debt you choose.

Debt snowball. Choose the account with the smallest balance, whatever its rate. When it closes, roll that whole payment onto the next smallest balance.

Debt avalanche. Choose the account with the highest APR. When it closes, roll that payment onto the next highest rate.

Neither method changes the interest rate you were charged. They only change the order in which your extra money is applied.

A worked example, on three debts

The minimums total $340. Assume $540 is available every month, so $200 is extra.

Repayment priority

• Snowball: Store card, then Card A, then Card B.
• Avalanche: Card A, then Card B, then Store card.

The assumptions. Each APR stays fixed for the whole repayment. Interest accrues monthly at APR divided by twelve, charged on the balance at the start of the month. No new borrowing, no fees, no late payments, no promotional rates. Minimums are paid first; the remainder goes to that method's target; when an account closes, its payment stays in the budget and rolls to the next target. Payoff is the month the last balance reaches zero. Every figure below comes from that month-by-month calculation.

Month one. Interest is $99.96 on Card A (4,800 multiplied by 24.99% divided by 12), $72.83 on Card B, and $3.25 on the store card: $176.04 in total. The minimums absorb $340, leaving $200 of extra.

• Snowball sends the $200 to the store card, which is paid $235 and ends the month at $418.25.
• Avalanche sends it to Card A, which is paid $320 and ends the month at $4,579.96.

Where each one lands

Same three debts, same $540 every month, and both finish in month 33. Avalanche pays $121.49 less interest. Snowball closes an account in month 3 instead of month 19.

Both finish in the same month because Card B, $9,200 at 9.50%, is the longest single timeline under either order, and both methods keep paying it the whole way. Card A also clears in month 19 either way: once the store card was gone, the snowball rollover pointed at it. Priority order and closure order are not the same thing: under avalanche the store card still closes in month 20 on its own minimum, because the rollover was flowing to Card B.

Why avalanche usually costs less

Interest is charged on the balance still outstanding, so a dollar sent to a 24.99% balance saves 24.99 cents a year, while the same dollar sent to a 6% balance saves 6 cents. Sending spare money to the highest rate first shrinks the most expensive balances fastest, so less interest builds up overall.

That holds whenever the two methods pick a different first target, on identical debts with an identical monthly budget and no new borrowing. It is arithmetic, not opinion. The gap widens as the spread between rates widens, and narrows when rates sit close together. Here it is $121.49, roughly 4% of the interest either method pays.

Why snowball keeps some people going

Avalanche is cheaper only if you stay with it. If the highest-rate balance runs to several thousand dollars and the smallest is a few hundred, the interest-first path can go a year or more without closing an account or showing anything that feels like progress. Many people stop before then, and a plan abandoned in month eight costs far more than a slightly more expensive plan that gets finished.

Snowball buys an early closing. In this example, a closed account in month 3 instead of month 19 costs $121.49. Whether that is worth paying is a question about your behaviour, not about the arithmetic.

When the two methods are identical

The orders coincide, and the results match to the cent, when:

• the highest APR is also the smallest balance. Raise the store card to 29.99% and both methods point at it first.
• one debt absorbs every spare dollar until it is cleared. Both methods pay it, and there is nothing else to order.
• every account carries the same rate. No ordering decision changes what the interest costs.

In those cases choose whichever one you will actually keep doing.

What changes the decision

Promotional rates expire. A 0% balance is temporary. If a card reverts to 29.99% while $4,800 is still outstanding, that month's interest becomes about $119.96. Treat the expiry date as the priority: any balance that cannot be cleared before it belongs at the front of either order.

Fees are part of the cost. A 3% balance-transfer fee on $9,200 is $276, which is more than the $121.49 gap between the two methods here. Annual fees, cash-advance fees and late fees work the same way. Compare total cost, not the headline APR.

Variable rates move. On a variable-rate card the current APR is only an estimate. If your highest-rate debt is variable and could rise, clearing it early is more attractive than fixed-rate arithmetic suggests. If it could fall, the advantage narrows.

Minimums barely dent a high-rate balance. On Card A the $120 minimum covers $99.96 of interest in month one, so about $20 reaches the principal. Paying minimums only on your most expensive debt keeps that balance nearly flat.

Choosing, and then committing

Write the order down, automate the payment, and revisit it when a balance closes or a rate changes. That is worth more than agonising over the difference between the methods.

One middle path is worth considering: clear a single small balance first to see an account close, then switch to highest-rate order for the rest. In the example above that costs a little over $100 and buys an early win.

Inside Monyra, the Debt Manager keeps each account's balance, APR, minimum payment and the payment you intend to make in one place, suggests a payoff order from your own figures, and shows the estimates it can derive from them: an estimated debt-free date, months remaining on each account, and the interest saved by paying above the minimum. It does not run a side-by-side snowball-versus-avalanche projection, so the worked example above is the comparison. You can see what it tracks on the debt and budget planner page.