Debt Snowball vs. Debt Avalanche: Choosing the Optimal Payoff Strategy

Eliminating multiple consumer debts requires a structured payoff strategy. Both the Debt Snowball and Debt Avalanche methods have distinct advantages.

1. The Debt Avalanche (Mathematically Optimal)

Under the Avalanche method, extra payments target the debt with the highest APR first (e.g., a 29.9% credit card) while maintaining minimum payments on others. This minimizes overall interest paid over the payoff journey.

2. The Debt Snowball (Psychologically Optimal)

Under the Snowball method, extra payments target the debt with the smallest balance first (e.g., a $250 medical bill). Rapidly eliminating small debts provides behavioral momentum and frees up cash flow quickly.

Summary Recommendation

If high interest is the primary stressor, choose Avalanche. If staying motivated is the biggest challenge, choose Snowball.