Snowball vs Avalanche: Digging Your Way out of Debt


If you’ve landed in a pile of debt that seems virtually impossible to get out from under, you may just need a new approach. Usually, people who have substantial dollar amounts of debt (not including mortgages and car payments) possess multiple credit cards. Realistically, credit card debt is one of the most problematic types of debt for most Americans. On average, Americans who are in debt have at least $15,000 in credit card debt.

“How did this happen? I only charged a few things!”

Let’s face it: this line of thinking is so easy to get into, and it leads down a very troubling path. The reason credit card debt racks up so (seemingly) fast is because charging is thoughtless. We don’t have to think about it – just swipe that card and worry about it later. Additionally, interest adds up much faster than anyone realizes.

Getting real with yourself about just how much credit card debt you owe can be painful. In this case, it’s best to treat it like taking off a bandaid and just do it quickly. Lay out all of your credit card statements in front of you and make a list of each card along with its current balance and interest rate. Tally up the total amount of debt. It’s not going to be fun, but sometimes a reality check is in order when a big change is needed.

Once you have a clear vision of all of your credit card debt, you’ll need to devise a plan for getting rid of it. There are several options that have been shown to work well: the Snowball Method and the Avalanche Method.

Snowball Debt Reduction Method

This type of repayment plan is best for people who have A LOT of different credit cards, store cards and other relatively small debts like doctors’ bills or personal debts to pay each month. It can be very easy to get overwhelmed and confused by the vast number of minimum payments coming in.

To give yourself a confidence boost, you can use the Snowball Method, which involves paying off the smallest debt first in order to eliminate it. You will continue making minimum payments on all other debts while you put more money toward your smallest debt.

After your smallest balance has been wiped out, you can successfully check that off your list of debts you owe! Then move on to the next debt (in order from smallest to largest) and pay them off one at a time until you have paid off all of your creditors.

Avalanche Debt Reduction Method

If you have a substantial amount due on one or more of your credit cards, the Avalanche Method might work best for your debt reduction plan. This plan has debtors tackling their debt in order of interest rate.

Thus, you would still focus on paying off just one debt at a time, while continuing to pay your monthly minimums on all other debts. The difference is that now you will first focus on the card with the highest interest rate. The thinking behind this strategy is that you’ll save more money in the end by eliminating high interest rate balances first.

The Real Truth

Both methods are fine! The most important thing is to do what motivates you to keep going. If the Avalanche Method feels too overwhelming you may end up back where you started really fast.

Choosing a debt reduction plan and sticking with it is what matters. *Special Consideration* – If you are looking at $40,000 in credit card debt and you make $30,000/year – you may need more than just a repayment plan. Filing for bankruptcy can be the best solution in extreme cases like this. If your debt repayment plan has you paying off your debts for more than five years, contact your local bankruptcy attorney to see what your best options are.


Image credit: Jon Nicholls

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