A payoff method chooses where an extra dollar goes after required payments are covered. The snowball starts with the smallest balance. The avalanche starts with the highest interest rate. Neither method creates an extra dollar, changes a creditor’s due date, or resolves a budget that cannot cover minimums.
Set up one comparison
| Debt | Balance | Annual rate | Required minimum in example |
|---|---|---|---|
| Store account | $600 | 12% | $30 |
| Card account | $2,400 | 24% | $80 |
| Total | $3,000 | Different rates | $110 |
Suppose $210 is available for these debts this month. The $110 of required minimums leaves $100 extra. Snowball directs the extra to the $600 debt. Avalanche directs it to the 24% debt. The total payment budget stays $210; only the destination changes.
Why the rate matters
Under a simplified monthly-rate model, keeping an extra $100 on the 24% debt for one full month costs about $2 in interest: 100 × 0.24 / 12. Keeping that $100 on the 12% debt costs about $1. This $1 difference illustrates the direction of the tradeoff; it is not a forecast of exact statement interest because real cards may use daily balances and different payment dates.
With constant rates, no added fees or borrowing, and the same total payment schedule, targeting the highest-rate eligible debt generally minimizes interest. Small-balance targeting may provide a sooner account closure and a simpler list to manage. Whether that helps you stay consistent is a personal behavior question, not an arithmetic claim about lower interest.
Build the payment order
- List each balance, rate, minimum, due date, and any promotion expiry. Use statements, not memory.
- Reserve minimum payments first. If that is not possible, contact creditors about hardship options before assuming an extra-payment method applies.
- Rank eligible debts by your chosen rule. Verify that extra payments are applied as intended and check for relevant prepayment terms.
- When a debt is cleared, consider directing its former payment to the next target, if your household budget still supports the same total.
Check after a month
Compare starting balances, interest or fees added, credited payments, and ending balances. If the ending balance differs from the worksheet, look for a transaction or assumption you missed. Update variable rates and expiring promotions. Do not keep using an old order when the conditions have changed.
Estimate one debt at a fixed payment
Assumptions and limits
A first-month comparison you can reproduce
Apply the example’s $210 total payment after simplified monthly interest. The smaller debt adds $6 and the larger debt adds $48. With snowball payments of $130 and $80, the resulting balances are $476 and $2,368. With avalanche payments of $30 and $180, they are $576 and $2,268. Either way the first-month total is $2,844. The different balances change interest in the next month.
The next month starts with modeled interest of $52.12 in the snowball scenario and $51.12 in the avalanche scenario, assuming unchanged rates and no activity. That one-dollar difference follows from the placement of the previous extra $100. It is not a complete multi-month forecast. Use the worksheet to record all minimums and promotions before choosing an order.
Use the worksheet
Download the blank CSV and fill it in privately in a spreadsheet app. It is an organizational template; it contains no automatic formulas. Use account nicknames, not account numbers. Do not upload the completed file to this website.
Download this guide’s worksheet (CSV) · Browse all worksheets
Suggested fields: Account nickname, Balance, Annual rate, Required minimum, Due date, Extra payment priority, Actual extra payment.
