Avalanche method.

In plain English

The avalanche method is a way to pay off several debts in the order that saves the most money. You make the minimum payment on everything, then put every extra dollar toward the debt with the highest interest rate. Once it is gone, you roll that payment onto the next-highest rate, and so on. Because it kills your most expensive debt first, it costs the least in total interest. Its rival, the snowball method, targets the smallest balance first for quicker wins and motivation.

01Why it matters

Choosing the avalanche method over paying debts in a random order can save real money, especially when high-rate credit cards are in the mix.

02The math, step by step

You owe on a 24 percent credit card and a 7 percent car loan. The avalanche method sends every extra dollar to the 24 percent card first, then the car loan, minimizing total interest.

03What this is NOT