Why the order changes the total
Suppose you can put $845 a month towards three debts. Every allocation of that $845 repays the same amount of principal eventually — what differs is how long each balance sits accruing interest, and each balance accrues at its own rate.
A dollar sent to a 24.99% card removes 24.99% a year of future interest. The same dollar sent to a 6.5% loan removes 6.5%. So directing spare money to the highest rate first, while every other account receives only its minimum, cannot be beaten: it is the allocation that maximises the rate at which interest is destroyed. That is the avalanche.
The snowball targets the smallest balance instead. It closes accounts sooner, which many people find easier to sustain, and it costs more — always at least as much interest as the avalanche, and usually more.
The word that does the work in both methods is cascade. Your total monthly commitment never falls. When the first debt closes, its minimum does not go back into your budget; it joins the attack on the next target. The commitment stays at $845 while the number of debts sharing it shrinks, so the pace accelerates sharply towards the end.
The month-by-month allocation
There is no closed form for several debts at different rates, so the calculator simulates. Each month it does four things in order.
One: accrue interest. Every open debt is charged its own balance times its own monthly rate, which is its APR divided by twelve.
Two: pay every minimum. Each open account receives its minimum, capped at what it owes. This is not optional — missing a minimum triggers late fees and, on a card, potentially a penalty rate.
Three: send everything left to the target. The remainder of the commitment goes to the highest-rate open debt under the avalanche, or the smallest starting balance under the snowball.
Four: cascade any overflow. If the target is cleared and money remains, it moves to the next debt in priority order the same month rather than sitting idle.
Running both orderings over the same balances, rates, minimums and commitment isolates the effect of the order alone. Every other input is identical, so the difference in total interest is entirely attributable to the sequencing.
Worked example: three debts and $300 of spare cash
Take the defaults: a card at $8,500 and 24.99% with a $200 minimum, a second card at $4,200 and 18.99% with a $105 minimum, and a car loan at $12,000 and 6.5% with a $240 payment. You have $300 a month above the minimums.
- Monthly commitment. 200 + 105 + 240 + 300 = $845, held constant until everything is clear.
- Avalanche order. By rate: the 24.99% card, then the 18.99% card, then the 6.5% loan.
- Month one on the target. Interest on the first card is 8,500 × 24.99 ÷ 1,200 = $177.01. It receives its $200 minimum plus the $300 extra, so $500 − $177.01 = $322.99 comes off the balance.
- Meanwhile. The second card is charged 4,200 × 18.99 ÷ 1,200 = $66.47 against its $105 minimum, so it falls by $38.53. The car loan is charged $65.00 against its $240 payment.
- The cascade. The first card clears in month 22, at which point $500 a month redirects to the second card, which clears in month 27. All $845 then attacks the car loan, which clears in month 36.
- Total interest. $2,101.77 on the first card, $1,436.48 on the second and $1,580.16 on the loan — $5,118.41 altogether.
- Now the snowball. Same money, order by balance: the $4,200 card, then the $8,500 card, then the $12,000 loan. Total interest is $5,552.33.
- The difference. The avalanche saves $433.92, and both plans finish in month 36.
Note that last line carefully. The avalanche saves real money here without removing a single month from the schedule — the saving lands inside the final payment rather than shortening the plan. Interest saved and time saved are different measurements, and either can be zero while the other is not.
How much the order is actually worth to you
The avalanche always costs no more than the snowball, but how much less varies enormously, and two things drive it.
The spread between your rates. If everything you owe is within a point or two, the ordering barely matters. If a 25% card sits next to a 6% car loan, it matters a great deal. Look at the two interest totals in the results — if they are within a few dozen dollars, the choice is genuinely free and you should take whichever you will stick to.
How much extra you have. This is the counterintuitive one, and the reference table below shows it. With no extra at all, the two orderings cost almost the same, because there is nothing discretionary to allocate. The saving peaks at a moderate extra and then falls as the extra grows further — at $1,000 a month everything clears in eighteen months, and eighteen months is not enough time for the ordering to matter much. The avalanche is worth most to households with some spare capacity but not a lot.
Then check the warnings. If any minimum is at or below that account's monthly interest, that balance grows in every month it is not the target — a real situation on high-rate cards with percentage-based minimums, and a reason to promote that debt regardless of ordering theory.
Finally, be honest about behaviour. The avalanche is arithmetically optimal, and an arithmetically optimal plan you abandon in month eight is worth less than a snowball you finish. If the interest difference here is small and closing an account sooner would keep you going, take the snowball and lose nothing that matters. If the difference is large, the avalanche is worth the discipline. The point of running the numbers is that you no longer have to guess which case you are in.
What the avalanche saves at different levels of spare cash
| Extra per month | Avalanche months | Avalanche interest | Snowball interest | Saved |
|---|---|---|---|---|
| $0 | 73 | $14,646.64 | $14,653.34 | $6.70 |
| $100 | 52 | $8,725.98 | $9,411.48 | $685.50 |
| $200 | 42 | $6,389.93 | $6,936.35 | $546.42 |
| $300 | 36 | $5,118.41 | $5,552.33 | $433.92 |
| $500 | 28 | $3,722.09 | $4,021.98 | $299.89 |
| $1,000 | 18 | $2,279.77 | $2,444.46 | $164.69 |
The saving is not monotonic in the extra payment: it rises from $6.70 to $685.50 and then falls back to $164.69. With nothing spare there is nothing to allocate, and with a great deal spare the whole plan is over before the rate difference can compound. Note also what the extra itself does — $300 a month cuts total interest from $14,646.64 to $5,118.41, which dwarfs the $433.92 the ordering contributes.
Assumptions and things to check
- Minimums are treated as fixed dollar amounts. Real card minimums fall as the balance falls, which would slow every plan modelled here. Committing to a fixed dollar payment is both the assumption and the recommendation.
- The commitment never drops. The entire acceleration depends on redirecting a closed account's payment rather than absorbing it into spending. If that will not happen, model the smaller commitment instead.
- No new borrowing. A card that keeps being used is a balance that never clears; see the credit card payoff calculator for what ongoing charges do to a payoff schedule.
- Promotional and variable rates. A 0% balance that reverts to 24% in eleven months should be modelled at the rate that will apply during most of the plan, not at the promotional rate.
- Federal student loans deserve special handling. They carry income-driven repayment, forbearance and forgiveness routes that no other consumer debt offers, so paying one down aggressively can forfeit real optionality. The student loan payment calculator covers those plans.
- Secured debt has a consequence unsecured debt does not. Falling behind on a car loan means repossession, so its minimum is not really optional in the way a card's is.
- Fees and penalty rates are not modelled. A single late payment can trigger a penalty APR on a card that would swamp any ordering benefit.
The alternatives to paying it off in order
Before optimising the order, ask whether the rates themselves can be changed. A balance transfer to a promotional 0% card converts interest into a one-off fee of typically 3% to 5%, which on high-rate balances is usually a large win — provided you clear the balance inside the promotional window. A fixed-rate consolidation loan replaces several revolving balances with one instalment loan at a lower rate and a definite end date; the personal loan calculator prices one including its origination fee, and the comparison to make is the loan's effective cost rate against the weighted average rate of what you are clearing.
Both of those change the inputs to this calculator rather than replacing it. After a transfer or a consolidation you still have a set of balances at various rates, and the highest-rate-first logic still applies.
Two things belong ahead of debt payoff in the queue. An employer retirement match is an immediate return that no interest rate matches. And a minimal cash buffer prevents the next unexpected expense from going straight back onto the card you just cleared — which is the single most common way a payoff plan fails.
Once the consumer debt is gone, the commitment you have built is the most valuable thing to come out of the exercise. Households that redirect a $845-a-month debt payment into saving rather than into spending are the ones for whom this was worth doing; the home affordability calculator shows what removing that payment does to what you can borrow for a house, and the 529 college savings calculator what it does compounded over a child's education.