Snowball or Avalanche: The Answer Depends on a Number You Can Check

There are two ways to order the repayment of several debts, and the internet has been arguing about them for twenty years.

The avalanche pays the minimum on everything and throws whatever is left at the highest interest rate. It is the arithmetically correct answer. The snowball throws it at the smallest balance instead, closing accounts one by one, and is what most advisers actually recommend.

The argument is always framed the same way: maths on one side, motivation on the other, pick your temperament. That framing skips the first question, which is whether the choice costs you anything at all.

The number nobody quotes

In 2023 Ben Hamilton took the Survey of Consumer Finances and did the obvious thing that the genre had somehow never done. Rather than argue about which method is better, he calculated what the snowball actually costs real households — every household in the survey with more than one debt, using their real balances, their real rates and their real minimum payments.

The distribution is wide, which is the expected part. The unexpected part is where it starts.

For roughly four households in ten there is no arithmetic in this argument. Their debts are arranged such that the highest rate and the smallest balance point at the same account, or the differences are too small to matter, or the minimum payments are already doing the ordering.

Those households have been reading a debate about a decision they do not have.

What predicts actually finishing

Now the other half, which is where the evidence is stronger than the arithmetic.

David Gal and Blakeley McShane looked at consumers working through a debt settlement programme and asked which measurable thing predicted eliminating all of it. Not the amount repaid. Not the interest rate. Not household income.

What predicted success was the proportion of accounts closed — how many debts a person had shut down relative to how many they started with, independent of the dollar balances involved. Closing a small account and closing a large one counted the same.

Kettle and colleagues then tested the mechanism directly, varying how repayment was allocated from entirely concentrated on one account to spread evenly across all of them. Concentration raised motivation to keep going and the likelihood of completing the plan.

Which is a specific claim, and worth stating precisely: it is not that small wins feel nice. It is that the number of open accounts is doing work that the balance on those accounts is not.

So the question is not which method is better

It is whether your debts are shaped so that the ordering matters, and that is a fact about your accounts rather than about your character.

1. List every debt with its balance, its rate and its minimum payment. Three columns. This is the step people skip, and skipping it is why the argument stays abstract.
2. Check whether the orders differ at all. Sort by rate, then sort by balance. If the top of each list is the same account, you are in the forty per cent and the debate is over — do either.
3. If they differ, find the size of the gap. The cost of the snowball is roughly the rate difference applied to the balance you are choosing not to attack, for the months until you reach it. A spread of two points on a small balance is not a decision. Fifteen points on a large one is.
4. Weigh that number against how many accounts you would close early. This is the trade the research actually describes — interest against completion probability — and you can now put a figure on one side of it.
5. Choose once and stop reading about it. The switching cost is real: a plan changed twice is a plan restarted twice, and the evidence on completion is about staying with one.

Only the second step tells you whether any of the others matter, which is why it comes before the arithmetic rather than after it.

The parts of this that are genuinely hard

Minimum payments complicate both methods more than either camp admits. Hirshman and Sussman found that the presence of a required minimum changes how people allocate across cards — the minimum acts as an anchor, pulling repayment towards the accounts that demand it rather than the ones that cost most. Whichever method you pick, the minimums are already doing some of the ordering for you, and not in your interest.

There is also a case where the arithmetic genuinely dominates. If one debt carries a rate far above the others — a payday loan, a card at the top of the range, anything compounding faster than you can close accounts — the avalanche is not a preference. Concentration still helps, but concentrate it there.

And none of this addresses the situation where the payments do not fit in the income at all. Repayment order is a question for a household that can service its debts and is choosing how. Below that line it is the wrong question, and the answer involves a conversation with the creditors rather than a strategy.

The bottom line

Sort your debts twice. If the two lists agree, the argument you have been reading does not apply to you, and roughly four in ten households are in that position.

If they disagree, the gap between the two lists is what the choice costs — and that is a number you can weigh against finishing, which is the outcome the research is actually about.

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