What is Debt avalanche?
When the highest-rate debt is paid off, its payment moves to the next-highest rate. In a simple model with the same money each month and no fees or promotional rates, this order leaves the least interest to pay, because each extra dollar removes the most interest. It does not change the minimums, and it can feel slow when the highest-rate debt is also the largest; in Academy's lessons a tie on rate goes to the smaller balance.
Also called avalanche method, highest-interest-rate method, highest rate first
Minimums first, then extra money to the highest APR; when that debt is gone, its payment moves to the next one.
Jordan's two cards (illustrative, lesson J1)
- Interest saved, extra $100 on Card A for a month: $100 × 27% ÷ 12
- $2.25
- Interest saved, extra $100 on Card B for a month: $100 × 18% ÷ 12
- $1.50
- Year's interest, avalanche / snowball (Rule B / Rule C)
- $360.65 / $398.95$38.30 less with avalanche in this model
Not a promise
The saving holds in a model with no fees, promotions or balance transfers; a 0% promotional balance can change which order costs least.