Debt
Avalanche, snowball, and which one finishes
One saves more interest. One is easier to stick with. The gap between them is usually smaller than the gap between starting and not starting.
The two methods
Both make every minimum payment every month. They differ only in where the extra goes.
Avalanche sends it to the highest interest rate. Snowball sends it to the smallest balance. Everything else is identical.
What the difference is worth
Take $4,120 on a card at 22%, $9,800 on a car loan at 6.4%, and $18,500 of student debt at 5.1%, with $600 a month above the minimums.
Avalanche clears the card first and saves a few hundred dollars of interest over the full payoff compared with snowball, which happens to start at the same place because the card is also the smallest balance.
Where the balances and rates disagree, the gap over several years is typically in the hundreds, not the thousands, unless one rate is dramatically higher than the rest.
When the rate difference is large, take the rate
A card at 22% against a mortgage at 3% is not a close call. Every dollar sent to the card returns 22% risk-free, which is better than any investment you can reliably buy.
The rule of thumb worth carrying: clear anything above your blended investment return before investing more, and keep the minimums current on everything else.
The method that finishes wins
Snowball exists because paying off an entire debt is motivating in a way that shaving interest off a large balance is not. Closing an account produces a visible result; a slightly smaller interest charge does not.
If avalanche means you stop after four months, the few hundred dollars it theoretically saved are irrelevant. Pick the one you will still be doing next year.
