In the ‘science’ of paying bills, there are two methods that personal finance experts recommend to get the most bang for your buck when it comes to payments: the snowball method and the avalanche method. Both of these methods are meant to be used for personal ‘unsecured’ debts. That means credit cards, auto loans, student and medical debt. They don’t apply to mortgages so don’t use them there. Each method has the same goal – getting you out of debt the quickest with the least total amount spent on interest, but the way they do so differs.

With the snowball method, you start by paying off the smallest debt first, and then tackle the rest one by one going up in size. In practice this means you take the entire amount of money you have that month to pay towards bills, and you pay the minimum on all them and then take all the rest of the money and put it all onto the smallest bill. One of the big advantages to the snowball method is that you get a psychological win of having bills totally paid off, which gives you a feeling of progress as you move on to tackling the bigger ones.

With the avalanche method, you also make the minimum payment on all debts except one, but this time the debt you focus on first is with the highest interest rate. The theory to the avalanche method is that a 20% interest credit card will charge you a lot more interest than a 5% car loan, and so you should pay it off first.

Both methods have you focus your efforts towards one debt at a time, then move onto the next one. Is the snowball or avalanche method better for you? It really depends on your situation. We like how the snowball method motivates you by giving you some easy wins and progress to start, but if you have discipline or some really high interest bad debts, then avalanche may be better for you. We recommend you use an online calculator to build your plan, or speak to a personal finance and debt advisor.