Why we all take the wrong pill
A fever is your body fighting an infection. Raise your temperature by one degree and some viruses replicate two hundred times slower. Doctors have known this for a century.
So what do we do the moment a fever shows up? Reach for the Tylenol. All of us. Parents, patients, most doctors. This is the debt snowball vs debt avalanche argument, and it matters less than people think.
Morgan Housel points this out in The Psychology of Money and gives the reason in four words: fevers hurt, and people don’t want to hurt. It might be rational to want a fever. It isn’t reasonable. Nobody shivering under a blanket at 2am cares what the studies say.
I thought about that a lot while writing this, because the debt snowball versus debt avalanche argument is the same argument in different clothes.
One method is mathematically correct. The other is the one people finish.
Debt snowball Vs debt avalanche, in one minute
Both methods work the same way. Pay the minimum on every debt. Take every spare dollar and throw it at one target debt. When that debt dies, roll its whole payment onto the next one, which is why the payment gets bigger and bigger as you go.
Only the order changes.
| Debt Snowball | Debt Avalanche | |
| Attack first | Smallest balance | Highest interest rate |
| Ignores | Interest rates | How big the balance is |
| You get | Fast wins, early | Lower total interest |
| Runs on | Motivation | Discipline |
That’s it. Everything else is argument about which order is better, and people argue about it with a heat normally reserved for politics.
Let’s settle the math first
The avalanche wins on paper. Always. It cannot lose, because paying the most expensive debt first is by definition the cheapest route. Anyone telling you otherwise is selling something.
The real question is by how much. Here’s a normal American debt load:
- Credit card: $6,000 at 23%
- Car loan: $9,000 at 8%
- Student loan: $12,000 at 6%
- Medical bill: $1,500 at 0%
Say you can find $200 a month above your minimums. Run both methods and here’s what happens: the avalanche costs about $4,258 in interest, the snowball about $4,700. Both finish in the same month.
The avalanche saved $441. That’s real money and I’m not going to pretend otherwise. It’s also about half of one monthly payment, spread across three and a half years.
LendingTree ran a similar exercise across several scenarios and found the gap ranged from nothing at all to $1,292. Their most realistic case, built on average American balances and rates, came out to a $29 difference. Twenty-nine dollars.
So before anyone picks a side: for most people, this fight is over a few hundred dollars.
Your numbers are not my numbers. Drop your real debts into the [debt payoff calculator] and watch both methods play out. It takes two minutes and it beats any example I could invent.
So why does anyone choose the slower one?
Because finishing is not guaranteed, and the research on this is more interesting than the math.
In 2012, two researchers at Northwestern looked at data from nearly 6,000 people working through a debt program. They wanted to know what predicted actually getting out of debt. It wasn’t how much money someone paid down. It was the proportion of individual accounts they closed. Closing whole debts, even small ones, predicted finishing.
A few years later a team including Boston University’s Remi Trudel studied around 6,000 users of a money app over three years. People who concentrated on one account at a time paid down more than people spreading money around. In one of their experiments, Trudel told NBC News, people closing accounts got out of debt about 15 percent quicker.
Now the honest part. There’s an earlier paper, from 2011, that found people pay off small debts first even when it clearly costs them money. The researchers called it debt account aversion and treated it as a bias to be corrected, not a strategy to be recommended.
Both things are true. The pull toward closing small accounts is a bias. It also seems to be the thing that keeps people going. That’s uncomfortable, and most articles on this topic pick whichever half suits their argument.
What Ramsey actually says (and the part people skip)
Dave Ramsey put the snowball in front of millions of people, and his reasoning in The Total Money Makeover is more honest than his critics admit.
He tells you flatly to ignore interest rates. List debts smallest to largest, and only use the rate to break a tie between two similar balances. His justification is that personal finance is 80 percent behavior and 20 percent head knowledge, so the snowball is built to change behavior rather than to be mathematically correct.
Then he adds something I didn’t expect. He admits he’s a math person by nature, that he used to start every problem by making the numbers work, and that he changed his mind. The math still has to work, he says, but sometimes motivation matters more. It reads like someone conceding a point rather than winning one.
His argument for why is a diet. Lose weight in week one and you stay on the diet. Go six weeks with nothing on the scale and you quit. Everyone reading this has lived one of those.
There’s a nice detail buried in his chapter too. He describes the snowball rolling downhill, picking up more payment as it goes, until by the time you reach your biggest debt you have, in his words, an avalanche. The two methods aren’t opposites in his head. One turns into the other.
The reason knowing better doesn’t help
James Clear opens a chapter of Atomic Habits in Karachi, Pakistan, in the late 1990s, where a public health worker named Stephen Luby was trying to get people to wash their hands.
The obstacle wasn’t ignorance. Everyone already knew handwashing mattered. They just did it inconsistently, or forgot, or rushed it. As Clear puts it, the problem wasn’t knowledge, it was consistency.
What worked was free Safeguard soap, which lathered nicely and smelled good. Handwashing became slightly pleasant, and within months diarrhea in the neighbourhood dropped by 52 percent and pneumonia by 48 percent. Six years later, more than 95 percent of those households still had a handwashing station, long after the free soap stopped coming.
Clear’s rule out of all this: what is immediately rewarded is repeated.
Look at the two debt methods through that lens. The avalanche rewards you eventually. The snowball rewards you in about six weeks, when a $200 medical bill disappears and one fewer creditor exists in the world. Neither reward is large. Only one of them arrives while you still care.
You already know which debt is cheapest to pay. Knowing has never been the problem.
Reasonable beats rational
Back to Housel, because he has the line that settles it for me.
He points out that academic finance chases the mathematically optimal strategy, while real people want the strategy that lets them sleep. He describes a 2008 study showing young savers could do better by borrowing two dollars for every one of their own to buy stocks. The math checks out. It’s also, in his words, absurdly unreasonable, because nobody watches their retirement account go to zero and calmly carries on with the plan.
Then this: anything that keeps you in the game has a quantifiable advantage.
That’s the whole thing. A plan you abandon in month four has a return of zero, no matter how elegant it looked in the spreadsheet. If the snowball costs you $441 and raises the odds you finish, it isn’t the irrational choice. It’s the price of staying in.
Where I’d part ways with Ramsey
Two places.
The 401(k) match. He tells people to stop retirement contributions while attacking debt, even when the employer matches them dollar for dollar. He knows what he’s giving up and argues focus is worth more. I don’t buy it. A full match is an instant 100 percent return, and there’s no debt at any interest rate that beats that. Take the match, then attack the debt with what’s left.
Worth noting he half agrees. In the same chapter he describes a single mother earning $24,000 with $89,000 of student loan and card debt, and says that for someone in a hole that deep, keep contributing to the match. If his own carve-out fits you, use it.
The rate spread. Ramsey says ignore interest rates entirely. That’s fine when your debts are all in the same neighbourhood. It stops being fine when you’ve got, say, $9,000 sitting on a 27 percent store card while you spend eight months clearing a 0 percent family loan. At some point the gap is too wide to wave away, and no motivation is worth that much interest.
He does allow exceptions himself, for things like an IRS debt or a looming foreclosure. So the rule was never as absolute as it sounds.
The version I’d actually use
Take one or two of your smallest debts and kill them fast. Get the win, watch a name disappear off the list, feel the payment roll forward.
Then switch to the avalanche for the big expensive stuff.
You buy the motivation cheaply, usually for a few dozen dollars of extra interest, and then you let the math take over for the long middle stretch where motivation matters less and the balances are large. Clear would approve, incidentally. His caution is that a short-term reward should point in the same direction as the long-term goal, and a closed account does exactly that.
Try it: run all three orders in the [debt payoff calculator] with your own numbers. Snowball, avalanche, and the hybrid. Seeing the gap in your own dollars is more convincing than anything I can write.
Three things to do before you pick a method
The order argument is the last decision, not the first one.
Cover every minimum payment, always. Both methods require it. A missed payment does more damage to your credit than either method saves in interest.
Get a small buffer in place first. Somewhere between $500 and $1,000. Without it, the first car repair goes straight back onto the card you just paid down. Ramsey has a good example of this: a woman whose air conditioner died mid-plan, spent $650 of her emergency fund, and paused her debt payoff to rebuild the fund before continuing. That’s the right instinct. [How to Build an Emergency Fund on a Tight Budget] covers how to get there.
Know your actual numbers. Every balance, every rate, every minimum, on one page. Most people have never seen the whole list in one place, and it’s usually less frightening written down than it is at 3am. [How to Make a Budget That Actually Sticks] will get you there.
If there’s barely $25 to spare
Then honestly, the method barely matters. What matters is the compounding.
Say you scrape together $25 a month. It looks pointless. But when that first small debt clears, its $40 minimum joins your $25. Now you’re paying $65. Clear the next one and you’re at $110. The engine of both methods is freed-up minimum payments, and it speeds up the whole way down.
That said, I’d rather be straight with you than encouraging. If you can’t cover minimums and essentials at the same time, no payoff order fixes that. The lever isn’t which debt to attack. It’s income, or help.
On income, [Side Income Ideas for People Who Are Already Tired] and [How to Get Out of Debt on a Low Income] are the more useful reads. Ramsey’s version of this, which I do agree with, is that when the snowball won’t roll you have to either sell something or earn more.
On help: a nonprofit credit counselling agency will talk to you free. Look for one affiliated with the National Foundation for Credit Counseling. They can set up a debt management plan, which rolls your unsecured debts into one payment, often at reduced interest. An Ohio State evaluation of one such programme found counselled clients cut their revolving debt by about $3,600 more than a comparison group over 18 months.
Be careful who you call, though. Legitimate counselling is free or cheap to start. If someone wants a big fee upfront, promises to make your debt vanish, or tells you to stop talking to your creditors, hang up.
And if the numbers genuinely don’t work, bankruptcy exists for a reason. Congress built it as a reset for people the math has beaten, and using it is a legal decision, not a moral one. Talk to a lawyer before you talk yourself out of it.
The verdict
Use the snowball.
Not because I think you’re bad at maths. Because the evidence says closing accounts keeps people going, because the cost of that is usually a few hundred dollars across several years, and because a plan you finish beats a better plan you quit in March.
Switch to the avalanche if you have one large balance at a rate far above the rest, and you know from experience that you stick with things. Use the hybrid if you want both, which is most people.
And if you’re still on the fence after all that, here’s the tiebreaker: the difference between the two methods is smaller than the difference between doing one of them and doing neither. Pick either one this week.
If the deeper problem is that there’s never anything left over to attack debt with, start with [How to Stop Living Paycheck to Paycheck] instead. That one comes first.
The free Budget Planner has a debt page for listing everything out, which is the step most people avoid: