In more detail
You pay the minimum on every debt, then put every spare dollar on the debt with the highest APR. When it is paid off, its whole payment rolls onto the next-highest rate, so the total monthly payment stays the same while it is aimed ever more efficiently. Because each extra dollar removes the most expensive interest first, no other order of payments costs less. See How Debt Payoff Strategies Work.
Why it matters
The saving grows with the gap between rates and the size of the balances. The downside is psychological: if the highest-rate debt is also large, months can pass before any debt disappears, and some people give up.
Example
The guide's example: Card A $5,000 at 22% (minimum $100), Card B $2,000 at 15% ($50), Loan C $800 at 9% ($25), with $375 a month in total.
| Plan | Payoff order (month) | Debt-free | Total interest |
|---|---|---|---|
| Avalanche | A (21), B (26), C (27) | 27 months | $1,629.85 |
| Snowball | C (4), B (12), A (28) | 28 months | $2,050.44 |
Common confusion
The debt snowball targets the smallest balance instead of the highest rate; it costs more interest but gives quicker wins.