What Is the Debt Avalanche Method for Paying Down Debt?

Rising costs have made it much more challenging to stick to a budget and avoid debt in recent years. The Federal Reserve reports that 46% of U.S. households carry credit card debt (based on 2022 data) and the average credit card balance in Q2 2024 was $6,699 according to Experian. So, if you’re currently struggling with your own pile of debt—credit card or otherwise—you’re far from alone.^{[1] [2]}

One way to address high-interest debt, like credit card balances, is to build a debt repayment plan that works for you. The debt avalanche method is one type of debt repayment method with the potential to help you save money and get out of debt faster.

The following guide will help you learn how to pay off debt with the debt avalanche method along with examples. As with any debt elimination strategy, there are pros and cons to evaluate so you can decide if the debt avalanche method makes sense for your situation. Finally, you’ll also discover key differences between the debt avalanche and the debt snowball—another popular debt repayment strategy—and tips on how to choose between the two options.

How to pay off debt with the debt avalanche method

When you use the debt avalanche method to reduce your debts, you create a strategy to pay down the balances on your credit obligations in a certain order—from the highest interest rate or annual percentage rate (APR) to the lowest. Instead of just paying extra money toward all of your debts each month, you work to pay off your accounts strategically. The primary goals of this strategy are to save as much interest as possible and to reduce your account balances at a faster rate.^[3]

It’s worth noting that as you decide which debts to pay off first, you might not want to include all of your credit obligations in a debt avalanche payoff plan. Many people focus on paying off high-interest revolving debt, like credit cards, first. This strategy may help you save the most money in interest charges and it might have the best long-term impact on your credit as well. However, if you owe balances on high-interest installment loans, you might want to include those accounts in your payoff plan as well.

Below are the basic steps of the debt avalanche process.

1. Make a list of your debts from the highest APR to the lowest

To begin the debt avalanche process, create a list of the debts you want to pay off. You can gather these details by reviewing your credit card and loan statements or by calling creditors for the current APRs, balances, and minimum payment details for each of your accounts. From there, place the debt with the highest interest rates at the top of your list, the account with the next-highest interest rate in second place, and so on. (See below.)

Debt Avalanche Example Total Debt: $38,500
Account Name	APR	Minimum Payment	Balance	Pay Off Order
ABC Rewards  Credit Card	23%	$400	$20,000	#1
XYZ Cash Back Credit Card	22%	$100	$5,000	#2
QRS Credit Card	21%	$150	$7,500	#3
LMN Credit Card	20%	$120	$6,000	#4

Source: Bankrate Minimum Payment Calculator ^[4]

2. Identify ways to pay down your debt

Once you know the debts you want to tackle (and the order in which you want to address them), a key step in the debt avalanche method is finding ways to increase your payments on those accounts. Of course, exact debt reduction strategies can differ depending on your financial situation. But below are some ideas for inspiration if you’re looking for ways to create more cash you can apply toward your debt elimination efforts.

• Cut expenses: Consider examining the expenses and spending categories in your household budget and look for opportunities to save. For example, you might be able to reduce your monthly dining budget by eating at home more. You could also spend less on groceries by changing where you shop or using money-saving apps to find the best sale prices in your area. You might also want to try a budgeting challenge for a fun twist on saving.
• Increase income: Finding ways to earn more money can also be incredibly helpful when you’re trying to pay down debt. You might be able to accomplish this goal by asking your employer for a raise, applying for a higher-paying position, or getting a new job that pays more than your current salary. There are also ways to make passive income on the side and side hustles you could consider—even if only on a temporary basis—while you’re working to reduce your debt.
• Use large influxes of cash wisely: Bonuses, tax refunds, and other large influxes of cash may also be good financial resources you can use to reduce balances with the debt avalanche method.

3. Pay down your debts in order

When you have access to extra cash, the debt avalanche method suggests you apply that money toward the account with the highest APR on your debt payoff list first. Repeat this process month after month until the balance on the account reaches zero. Once you pay off the first debt on your list, you can take the money you were paying to the first creditor and apply it toward the debt with the next-highest APR. Following this plan helps you accelerate the debt elimination process because you’re saving money in overall interest charges.

It’s also important to note that you still need to make the minimum payment on all of your other credit obligations every month during the debt avalanche process. Making the minimum monthly payment is important because it protects your credit score and keeps your accounts in good standing. By paying the minimum payment, you can also avoid late payments, collection accounts, and other potential financial and credit problems.

4. Consider debt consolidation

If you’re using the debt avalanche method to pay down the balances on several accounts, you might want to consider whether debt consolidation could help you reach your goals faster. With debt consolidation, you apply for a new loan or balance transfer credit card offer and merge some or all of your existing debt into a new account. Consolidating debt may help you save even more money on interest and reduce debt faster. The process could also reduce your credit utilization ratio and help you build credit over time.^[5]

Yet there are possible drawbacks to consider before you consolidate debt as well. For debt consolidation to be most effective, it’s important that your new account features an APR that’s lower than the interest rates you’re paying on your current debt. And you typically need good credit to qualify for debt consolidation offers with competitive interest rates. Therefore, if you have bad credit or no credit, debt consolidation might not be a good fit for you—at least not until you work to build your credit.

Additionally, even if you qualify for a competitive rate on a debt consolidation loan or balance transfer offer, you might not be eligible for enough financing to pay off all of your debt. Debt consolidation could still help you save some money in this scenario. But you would probably want to include the new loan or balance transfer card in your debt avalanche debt list and make sure you still have a plan to pay off the balance in the not-too-distant future. (See below for example.)

Debt Avalanche Example —  After Debt Consolidation
Pay Off Order	Account Name	APR	Minimum Payment	Balance
N/A	ABC Rewards  Credit Card	23%	$0	$0 (After debt consolidation)
N/A	XYZ Cash Back Credit Card	22%	$0	$0 (After debt consolidation)
#1	QRS Credit Card	21%	$150	$7,500
#2	LMN Credit Card	20%	$120	$6,000
#3	NEW Balance Transfer Card	0% APR for 21 months, then 23.74%	$500	$25,000

Note: In the example above, if you only paid the minimum payment on the balance transfer card ($500) for 21 months you would still have a remaining balance of $14,500 at the end of the 0% APR promotional period. At that time, the APR on the remaining balance ($14,500) would increase to 23.74%.

If you’re following the debt avalanche method, you would want to pay off the two credit cards with the highest APRs (QRS Credit Card then LMN Credit Card) first. Next, you would pay any extra available cash toward the new balance transfer credit card—ideally paying off that debt before the 21-month promotional period ends. If you can’t afford to pay off the full debt on the new balance transfer card before the promotional period ends, you could continue the debt avalanche method after the higher APR kicks in on the balance transfer card or consider another debt consolidation method.

Debt avalanche example

It can take time to pay off your credit obligations using the debt avalanche method—especially if you owe outstanding balances on several debts. But the potential savings using this strategy could be significant. Depending on your original balances and how much extra money you can apply toward paying down your debts each month, the debt avalanche method could help you save hundreds or even thousands of dollars in interest. Here’s how.

For the sake of example, we’ll use the same debt payoff figures from above (without a debt consolidation option). Our example also assumes you have an extra $1,000 per month to pay toward your debts on top of your minimum payments. So, in the scenario below you would be paying $1,770 per month ($770 minimum payments + $1,000 extra) toward debt elimination each month.

Debt Avalanche Example Total Debt: $38,500 Total Monthly Payments: $1,700
Account Name	Payoff Length	Total Interest	Total Payments	Payment Schedule
#1: ABC Rewards  Credit Card (23% APR)	1 year and 5 months (17 months)	$3,594.69	$23,594.67	Pay $1,400.00 until month 16, then $1,194.67 at month 17 to pay off.
#2: XYZ Cash Back Credit Card (22% APR)	1 year and 9 months (21 months)	$1,717.51	$6,717.50	Pay $100.00 until month 16, $305.33 until month 17, $1,500.00 until month 20, and  $312.16 at month 21 to pay off.
#3: QRS Credit Card  (21% APR)	2 years and 1 month (25 months)	$2,923.55	$10,423.53	Pay $150.00 until month 20, $1,337.84 until month 21, $1,650.00 until month 24, and $1,135.70 at month 25 to pay off.
#4: LMN Credit Card  (20% APR)	2 years and 4 months (28 months)	$2,544.65	$8,544.64	Pay $120.00 until month 24, $634.30 until month 25, $1,770.00 until month 27, and $1,490.33 at month 28 to pay off.

Source: Calculator.net^[6]

In the example above, the debt avalanche method would help you pay off $38,500 worth of credit card debt in 2 years and 4 months. By making fixed payments of $1,770 per month (of which $1,000 is an extra monthly payment) you would pay $10,780.41 in total interest and $49,280.33 overall to your credit card issuers.

By comparison, if you only paid the minimum payment on $38,500 worth of credit card debt (assuming a 2% minimum payment or around $770 per month to begin), it would take you over 30 years to repay your debt. You would also pay over $235,500 including principal and interest.^[7]

The difference between debt avalanche and debt snowball

The debt avalanche method is similar to another popular debt elimination plan—the debt snowball method. Both debt repayment strategies recommend listing out the debts you want to pay off in a preferred repayment order. You also need to keep up with the minimum monthly payments on all of your accounts.

Yet there are differences between these two payoff strategies as well.

• Payoff order: With the debt snowball plan, you focus on repaying the debts with the smallest balances first regardless of the interest rate.
• Motivation: The debt snowball strategy may keep you motivated to continue your debt payoff journey because you can celebrate small victories (aka zero balances) at a faster rate.
• Credit score impact: With the debt snowball strategy, you pay off smaller accounts sooner. When you have fewer accounts with balances on your credit report or if you pay off credit cards and reduce your credit utilization ratio, you might see a positive impact on your credit score sooner rather than later. However, both payoff strategies could be good for your credit in the long run.^[8]
• Total interest paid: In general, you’ll pay more overall interest if you follow the debt snowball method compared to the debt avalanche method.

On a positive note, there’s no “bad” way to pay down your debts. If you’re not sure where to start, try evaluating your goals and motivations. From there, you can choose the debt payoff method that seems best for your situation.

Pros and cons of the debt avalanche method

Another way to figure out if the debt avalanche method is right for you is to review the benefits and drawbacks of this strategy. Below are some pros and cons to consider.

Pros

• Interest savings: If you follow the debt avalanche method consistently, you could potentially save a significant amount of money in interest charges over time.
• Less time in debt: The debt avalanche method may help you repay your debts faster—especially if you’re able to make extra payments—because less overall interest should accumulate on your accounts.

Cons

• Potential for discouragement: If it takes a long time to pay off the first account on your debt avalanche list, you might get discouraged and have a harder time sticking with your payoff plan.
• Doesn’t address overspending: It’s still critical to update your budget and get a handle on any overspending issues that led to credit card debt in the first place. The debt avalanche (or any other payoff strategy) isn’t a plan to avoid future overspending.

Is the debt avalanche method right for you?

The debt avalanche method can require some patience to complete—especially if your highest APR account also has a large balance. But this debt elimination strategy has the potential to save you a lot of money and financial stress if you can be consistent and avoid new debt.

Still, it’s important to be honest with yourself. If you think you’ll feel motivated by paying off individual debts faster, the debt snowball might make more sense for you. It’s also helpful to remember that even if you start paying your debts with a different payoff plan, you can always switch to the debt avalanche method in the future.

Sources

1. StLouiseFed.Org. “Which U.S. Households Have Credit Card Debt?” https://www.stlouisfed.org/on-the-economy/2024/may/which-us-households-have-credit-card-debt#:~:text=In%20fact%2C%2061%25%20of%20households,least%20some%20credit%20card%20debt.&text=SOURCES:%202022%20Survey%20of%20Consumer,the%20end%20of%20the%20month
2. Experian.com. “Credit Card Balances Are Growing the Fastest in These 20 Cities.” https://www.experian.com/blogs/ask-experian/research/cities-where-credit-card-balances-are-rising-the-most/
3. Key.com. “What Is the Debt Avalanche Strategy?” https://www.key.com/personal/financial-wellness/articles/debt-avalanche-strategy.html
4. Bankrate.com. “Minimum Payment Calculator.” https://www.bankrate.com/credit-cards/tools/minimum-payment-calculator/
5. Experian.com. “How Does Debt Consolidation Affect Your Credit Score?” https://www.experian.com/blogs/ask-experian/can-debt-consolidation-affect-your-credit-score/
6. Calculator.net. “Debt Payoff Calculator.” https://www.calculator.net/debt-payoff-calculator.html
7. Greenpath.com. “Credit Card Minimum Payment Calculator.” https://www.greenpath.com/calculators/DebtPayoff2.html
8. myFICO.com. “What Is Amounts Owed?” https://www.myfico.com/credit-education/credit-scores/amount-of-debt

About the author

Michelle Lambright Black is a nationally recognized credit expert with two decades of experience. She is the founder of CreditWriter.com, an online credit education resource and community that helps busy moms learn how to build good credit and a strong financial plan that they can leverage to their advantage. Michelle's work has been published thousands of times by FICO, Experian, Forbes, Bankrate, MarketWatch, Parents, U.S. News & World Report, and many other outlets. You can connect with Michelle on Twitter (@MichelleLBlack) and Instagram (@CreditWriter).

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