Debt Avalanche Method Instructions

A debt avalanche may sound like something to avoid, but it's actually a good thing if you want to save money on your credit card debt. The debt avalanche method is a debt payoff strategy that prioritizes paying off your highest-interest (read: most expensive) debt first.

The amount of interest you pay on your credit card debt is based on your balance and your interest rate. The higher the interest rate, the more expensive it is to carry that balance. By prioritizing your highest-interest cards, you can reduce how much your debt costs you overall.

A key part of this strategy is making all of your minimum payments. Then you put extra on one card. If you're struggling to make your minimum payments, you may want to consider other credit card debt relief strategies.

Want to see if a debt avalanche is just what you need? Let's look at how it works, plus go over some examples so you can see it in action.

How the Debt Avalanche Method Works

Using the debt avalanche method requires a little bit of prep, but then it's just about going down your list. Here's how a debt avalanche typically works:

1. List all of your credit cards. Write down each of your credit cards, along with its balance and interest rate. Find the interest rate on your monthly statement.

2. Organize your cards based on the APR. Put the card with the highest APR at the top of your list. Put the card with the second-highest rate next, then the third-highest, and so on.

3. Make the minimum payment on each card. Payments should be made at least a couple of days before the due date so you don't risk a late payment.

4. Put any money you can spare toward the card at the top of the list. Even a few extra bucks can help get your principal down faster. Not sure where your budget stands? List out your expenses and income to get the big picture. Then, look for places you can find extra cash to put toward your debt.

5. Once you pay off the first card, move down the list. The extra money, plus the money from the minimum payment you were making on the card you’ve paid off, should be added to the payment for the next card.

With this method, the goal is to get your highest-interest cards out of the way first. This can reduce how much you pay in interest fees overall.

Examples of the Debt Avalanche in Action

Sometimes it's easier to picture something financial when you can see examples. Here are two hypothetical cardholders, each with five credit cards to pay off, using the debt avalanche method.

Example 1

Alex owes $9,000 in total credit card debt, spread out like this:

Using the debt avalanche method, Alex would pay off the cards in this order:

1. Card D (30% APR)

2. Card A (27% APR)

3. Card B (26% APR)

4. Card C (23% APR)

5. Card E (19% APR)

So Alex would make all five minimum payments. Then, Alex's extra money would be put toward Card D each month until it's paid off. Once Card D is paid off, the money Alex was putting toward Card D would go to paying off Card A—and so on.

Example 2

Jess owes $13,500 in total credit card debt, spread out like this:

Using the debt avalanche method, Jess would pay off the cards in this order:

1. Card C (28% APR)

2. Card B (25% APR)

3. Card D (22% APR)

4. Card E (21 % APR)

5. Card A (18% APR)

For Jess, the focus starts with Card C. Once each card's minimum payment is made, any extra money Jess has for debt that month can go toward paying off Card C. When Card C is paid off, the money Jess was putting toward it can go to Card B. Then on down the list until all five cards are paid off.

Debt Avalanche vs. Debt Snowball

The debt avalanche method is often mentioned along with the debt snowball method, but they're different approaches. Instead of prioritizing high-interest cards to save on fees, the debt snowball method prioritizes paying off your cards in order of smallest balance to largest.

Some folks prefer the debt snowball method because it’s the fastest path to your first payoff. Your first payoff is bound to feel fantastic. That could give you a good burst of motivation to keep the payoffs rolling. 

The snowball method can be very effective. The avalanche method could help you save on interest. What's great is that you don't have to pick one or the other. You can use the debt snowball, the avalanche, or some combination of the two—whatever works for you and your financial goals.