If you're struggling to pay off your credit card debt, you may be wondering how to get started. There are two popular methods for paying off credit card debt: the Debt Avalanche Method and the Debt Snowball Method.
Both of these methods can be effective in helping you become debt-free, but they work differently. In this article, we'll explain the differences between these two methods and help you decide which one is right for you.
Comparing the two
The Debt Avalanche Method is a strategy where you focus on paying off the credit card with the highest interest rate first. Once that debt is paid off, you move on to the next highest interest rate, and so on.
The Debt Snowball Method is different, in that it has you focus on paying off the smallest balance first, regardless of the interest rate. Once that debt is paid off, you move on to the next smallest balance, and so on.
So which method is better? It depends. If you're someone who needs quick motivation to keep going, then the Debt Snowball Method may be right for you. Seeing those balances disappear quickly can give you the boost you need to stick with your plan and pay off all of your debt.
On the other hand, if you're someone who is motivated by saving money, then the Debt Avalanche Method may be a better fit. By focusing on the debt with the highest interest rate, you'll save more in interest over time.
No matter which method you choose, the important thing is to get started and stick with it.
Advantages and disadvantages of the Debt Avalanche method
The Debt Avalanche approach entails making modest payments on all of your outstanding debts, then paying off the bill with the highest interest rate using any money left over. The debt avalanche technique is most advantageous in terms of interest payments.
You may save hundreds of dollars in interest payments by following the Debt Avalanche approach and simply changing the order of your debt payoffs. The Avalanche method can also help individuals with larger amounts of debt to pay off their debts more quickly.
The Debt Avalanche technique is the most effective approach to saving money and time, but it does have certain disadvantages. It mostly requires fortitude—to put all of your spare cash toward repaying a specific debt rather than just the minimal. If you lose interest and skip a month or two of planned payments, the debt avalanche will not work as well.
The advantages are that you pay less interest over time, it cuts down on the amount of time it takes to get out of debt, and it's good for budget-conscious individuals. The drawbacks of the Avalanche approach are that it takes dedication and a regular supply of money.
Chase Freedom Flex℠
Best for Beginners
$200
Advantages and disadvantages of the Debt Snowball method
Pros
The Debt Snowball technique is a useful strategy to use when tackling debt. The goal is to pay off the smallest debts first in order of size, then move on to larger ones—sort of a "tackle the easy tasks first" approach. In ascending order of size, you list all your outstanding obligations.
Start by going through your credit cards one by one, starting with the card with the lowest outstanding balance and paying it off first. You should put as much extra money as possible into each payment for those debts.
For the remaining balances, you pay only the minimum amount each month. When you've paid off the first debt, you apply this extra-payment method to the next smallest one.
The Debt Snowball technique's major benefit is that it helps develop motivation. Because you see rapid results—such as wiping out some outstanding balances entirely in only a few months—it motivates you to follow the plan.
Drawbacks
The major disadvantage of the Debt Snowball approach is that it may be more expensive in total. You could pay extra interest if you prioritize liabilities over APRs.
Depending on the debts and how quickly the interest on them compounds, becoming completely debt free and clear might take longer.
Considerations
The Debt Snowball and the Debt Avalanche are both valid strategies to pay off your debt. It is, in reality, a matter of what you as an individual require to adhere to a strategy and be successful.
If you need quick motivation, go with the Debt Snowball Method. If you're more motivated by saving money, go with the Debt Avalanche Method. No matter which method you choose, the important thing is that you get started and stick with it!
So which method is better? It depends. If you're someone who needs quick motivation to keep going, then the Debt Snowball Method may be right for you. Seeing those balances disappear quickly can give you the boost you need to stick with your plan and pay off all of your debt.
On the other hand, if you're someone who is motivated by saving money, then the Debt Avalanche Method may be a better fit. By focusing on the debt with the highest interest rate, you'll save more in interest over time. No matter which method you choose, the important thing is to get started and stick with it. You can't succeed if you don't try!
Take the first step today and figure out which method is best for you. Debt freedom is within reach! Whichever method you choose, make a plan and stick to it.
Debt freedom is possible if you're willing to put in the work. So take that first step today and get started on your journey to becoming debt-free.
