Debt Avalanche: A Decisive Method to Pay Off Credit Cards

With the debt avalanche method, you prioritize credit card balances with the highest interest rates.

Gregory Andersen
Managing Editor at Tally

Being in debt can be very stressful and cause a great deal of anxiety. It can take its toll both mentally and physically. And, sadly, it’s also incredibly common.

Credit card debt is easy to incur, but difficult to get out of. It needs to be dealt with as soon as possible because the interest rates can add up quickly. In fact, most people end up paying more for the interest of their debt. 

Finance experts and money managers all have a lot to say about debt — credit card debt in particular. The single most important advice they will give is don’t get in debt in the first place. Practice responsible money management and self-control. Having a credit card does not mean having extra money. If you can’t afford something, don’t buy it. 

But what if you’re already in credit card debt, what then? What’s the fastest and smartest way to pay it all off?   

In the world of financial advice, there are two common paying off debt strategies: the debt snowball method and the debt avalanche method. Let’s dig into the details. Which one works best? Which method will help reduce and eliminate credit card debt?

What’s the debt snowball method?

The debt snowball method prioritizes your balances. You pay off your credit card debts from smallest balance to largest balance, regardless of the interest rate, while paying the minimum payment on the rest.

With the debt snowball method, you see quicker results. Credit card debt can be frustrating, and those small victories can be empowering. They can help build confidence and keep you motivated to get rid of your debt entirely.

Here’s how it works: You have three credit cards with outstanding balances of $2,000, $4,000 and $6,000. With the debt snowball method, you pay the minimum on your $4,000 and $6,000 credit card balances, then put as much as you can afford toward the $2,000 balance.

By tackling the smallest balance first, you’ll clear the debt faster — and that momentum can have a snowball effect as you move on to address your remaining balances.

What’s the debt avalanche method?

The debt avalanche method prioritizes your interest rates. You pay off your credit card debts from highest interest rate to lowest interest rate, regardless of the balance.

With the debt avalanche method, you save money on interest and, ultimately, pay off your credit card debt faster.

Here’s how it works: You have three credit cards with outstanding balances of $2,000, $4,000 and $6,000. With the debt avalanche method, you pay the minimum on your $2,000 and $4,000 credit card balances, then put as much as you can afford toward the $6,000 balance.

By tackling your highest interest rates first, you save money in the long run. You won’t experience the quick, small victories that come with the debt snowball method, but that first big victory can make a major impact (kind of like an avalanche).

What’s the best way to repay my debt?

The debt snowball and debt avalanche methods can both help you achieve your goal. The question of which strategy is best boils down to your individual needs.

Do you need that extra bump of motivation? Would a few small victories inspire you to push harder toward your goal of becoming debt-free? If that sounds like you, the debt snowball method may be right for you.

Consider the pros and cons of the debt snowball method:

Pros:

  • Paying off smaller balances will yield quick results
  • Those small victories can be a motivational tool
  • Fewer outstanding balances can reduce stress

Cons:

  • Ignoring higher interest rates could cost you more money
  • Higher interest rates increase your total amount of debt
  • Increasing your debt means you’ll be in debt longer

Are you losing a big chunk of money to interest payments every month? Can you make disciplined decisions, even if the benefits aren’t immediate? If that feels right, the debt avalanche method may be a better fit.

Are you losing a big chunk of money to interest payments every month? Can you make disciplined decisions, even if the benefits aren’t immediate? If that feels right, the debt avalanche method may be a better fit.

Now, consider the pros and cons of the debt avalanche method:

Pros:

  • Paying off balances with higher interest rates will save you money over time
  • Tackling higher interest rates first decrease your debt
  • Decreasing your debt means you’ll be out of debt quicker

Cons:

  • Prioritizing high interest rates requires patience
  • Motivation can be hard to sustain without immediate results
  • More outstanding balances can cause stress

If you’re still unsure, use an online calculator to see exactly how the debt snowball and debt avalanche methods can help you. Figure out how long it will take to be free from credit card debt and how much you’ll spend in interest.

Tally maximizes savings with the debt avalanche method

At Tally, we’re focused on saving you money. That’s why we wholeheartedly endorse the debt avalanche method. We even apply the debt avalanche method to every member’s account!

Here’s the best part: With Tally, it’s never been easier to make disciplined financial decisions. As the world’s first automated debt manager, Tally analyzes your credit card balances and interest rates and makes the most efficient payment decisions on your behalf.

(Spoiler alert: It’s always the debt avalanche method.)

For us, it comes down to math. You’ll pay less money in interest if you prioritize your credit card balances with the highest interest rates. And the money you save using the debt avalanche method can be reapplied to other credit card balances — that means you’re saving money and getting out of debt faster. Isn’t that the whole point?

The sooner you get out of debt, the sooner you can use your money on more important things like investments, your health, a business, or what have you.

Bottom line: Credit card debt can be debilitating and digging yourself out of debt is a great achievement. The sooner you are able to do it, the better. The small victories that come with the debt snowball method are encouraging, but the debt avalanche method is the most effective and efficient way to get out of credit card debt. If you’re interested in using the debt avalanche method, but still want that extra bit of motivation, download Tally and get the best of both worlds.