How the debt avalanche method works

At heart, avalanche is a rule for where to send extra money. That money can come from a refinance, a raise, extra earnings, or a bill you've cut. Add nothing, and the method kicks in as soon as the first debt is paid off on its own. Add even $100 extra a month and you'll be debt free sooner, but don't expect an early payoff to show for it. Avalanche saves its results for the end.

Most explanations stop at the rule. Here's what the next five years actually look like, laid out on a calendar.

The rule

1. Pay the minimum on every debt, every month.
2. Put every extra dollar toward the debt with the highest APR.
3. When a debt is paid off, roll its entire payment into the next highest rate.

That third step is the engine. Your total monthly payment never changes, but the amount landing on your target grows every time a debt is paid off. True to its name, it's slow at first, but once it gets going, things happen fast.

The example

Realistic rates and balances.

On top of that, assume you put in an extra $100 each month. Avalanche sends it to Credit Card 1, the highest rate, to start.

What actually happens, month by month

Look at the first row, because it's the part nobody mentions.

For the first 49 months, avalanche looks exactly like doing nothing. No account gets paid off. Your first payoff, the auto loan in month 50, lands in the same month it would on minimum payments alone.

Then everything happens at once. All four debts are paid off within nine months.

Compared with just paying minimums

The first two rows are identical in every column. With or without extra money, avalanche never changes when the auto loan or Credit Card 2 gets paid off. Both are paid off by the payments you were already making, exactly when they would have been anyway.

The middle column shows what rolling does on its own. With no extra money, it moves your finish from 9 years 10 months to 5 years 7 months and saves $5,814 in interest. The extra $100 takes you to 4 years 11 months and saves another $5,728, for $11,542 in total.

For context, the minimums-only interest of $37,161 is more than half of the original $66,750. Put another way, you'd pay back about $1.56 for every dollar you borrowed.

Why one card gets all the attention

Left on its $450 minimum, Credit Card 1 takes almost eight years to pay off and costs $24,264 in interest. That's about two thirds of all the interest you'd pay on minimums, from a card that makes up just over a quarter of your debt.

Under avalanche, it's paid off in month 54 and costs $13,494 in interest. Focusing first on that one card saves you $10,770.

Your total saving against minimum payments is $11,542, so more than 90% of it comes from a single account. The auto loan and Credit Card 2 cost exactly what they would have on minimums: $4,116 and $6,091.

That's the whole method in one fact. Avalanche works by putting your money where interest compounds fastest, and leaving everything else alone.

When things change

You get a windfall. It goes on the current target, the highest rate. Don't spread it around, and don't put it on the smallest balance just because paying it off would feel good.

You miss a month. Nothing resets. Cover the minimums if you can and carry on. Missing a minimum is the expensive mistake, because of late fees and the risk of a penalty rate. Missing the extra $100 costs you a few weeks.

You take on new debt. Re-sort. If the new debt has the highest rate, it becomes the target immediately. Avalanche is a rule, not a fixed queue.

Your income is irregular. Set the extra as a share of what comes in rather than a fixed amount. The method works with any number, including zero in a bad month.

A 0% promotional rate is about to end. This is the one real exception. A card at 0% that jumps to 24.99% in three months should be treated at the rate it's about to have. Otherwise avalanche ignores it right up until it becomes your most expensive debt.

You have no savings. A surprise expense will go straight back on a card and undo months of progress. Our guide on how much cash to keep in savings covers how big that cushion should be.

Three mistakes that cost real money

Is avalanche right for you?

If you're steady and want the cheapest route, yes. The price is patience: about four years in which your progress looks exactly like paying the minimums.

If that sounds like the point where you'd give up, better to know now than in month 30. The snowball method pays off your smallest balance first instead. On this example it gets you your first payoff 15 months sooner, and costs $2,809 more in interest. Our snowball vs avalanche comparison helps you decide which one fits.