Snowball or avalanche: what does the choice actually cost?

Avalanche wins, by less than the internet implies. Snowball loses money and buys something the arithmetic does not show. Here is the same debt paid off both ways, with every figure computed rather than quoted.

The example

Two cards, one budget, nothing else changing. The rates and balances are chosen so the two methods actually disagree — if the smallest balance is also the highest rate, both methods pick the same card and there is nothing to decide.

Budget: $400 a month, every month, until both are clear. Minimum payments are 1% of the balance, floored at $25. Everything left over goes to one card, and which card that is is the entire question.

What each method costs

Read that table twice

Avalanche is cheaper. It is cheaper by $706 over three years, which is about $20 a month, and it finishes two months sooner. That is real money and it is the correct answer to the question people think they are asking.

But look at the last column. Under avalanche, nothing finishes for twenty-nine months. You pay $400 a month for nearly two and a half years and both cards are still open the whole time. Under snowball the store card is gone in nine, and from month ten there is one card left instead of two.

That is what snowball is buying with the $706. Not a feeling — a structural change to the next twenty months of the plan. Whether it is worth $706 depends on something no calculator knows: whether you are still doing this in month twenty-nine.

The honest recommendation

1. Take avalanche if you will finish either way. If you have paid down debt before and stuck with it, the $706 is free and there is no argument for the other one.
2. Take snowball if you have quit before. A method you abandon in month fourteen costs far more than $706. The cheapest plan is the one that gets finished, and that is an argument about you rather than about interest rates.
3. Check whether they even differ. Run both. If your smallest balance is also your highest rate — which is common — the two methods choose the same card and the whole debate is moot for you.
4. The budget matters more than the method. On this example, raising $400 to $500 beats either method by more than the methods differ from each other. Argue about the $100 before you argue about the order.

Where these numbers came from

They are simulated month by month, not looked up: interest accrues on each balance at APR ÷ 12, the minimum is paid on every card, and the remainder of the $400 goes to the target card until it clears, at which point its whole payment rolls to the next one. Rounded to the nearest dollar. The minimum used here is a deliberate simplification: most issuers charge 1% of the balance plus that month’s interest, which on this example pushes avalanche to 37 months and moves snowball’s first cleared card from month 9 to month 16. The gap narrows, the answer does not change, and neither does the reason to pick one over the other. Change any of the balances, the rates or the budget and the gap changes with them — the point of the example is the shape of the trade, not these four figures.