NDSU Extension Service - Ramsey County


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A Debt Avalanche for Credit Cards

A Debt Avalanche for Credit Cards


There are a lot of options when it comes to debt relief and debt avalanche is one of them. If you have the income to support your payments and your basic expenses at the same time, debt avalanche can be an option for you.

Deb avalanche focuses on restructuring your payment plan by ranking your debts according to priority. Debt avalanche puts the debt with the highest interest rate first on that list.

So what exactly is the benefit of paying off the high interest debt first?

One the most prominent reason is you are actually reducing your overall debt payments by removing the high interest debt first.

Most credit card companies will continue adding the interest amount to your balance as long as you are carrying it over to the next month. The interest amount that is added to your debt will be based on your interest rate and the balance from your previous billing. When you concentrate on your the debts with the biggest interest rate, that means you will put in the most money into this account. That will help lower your balance faster and in effect, the interest amount that you will end up sending to your creditors.

With the debt avalanche method, you pay off the highest interest rate first, and then keep going downhill (like an avalanche) with the next highest interest rate.

  • Going strictly by numbers, debt avalanche is better. You're targeting the accounts with higher interest rates first.
  • The downside to debt avalanche is that with higher interest rates, you probably also have a higher minimum payment. So less money is going towards the principal which translates into taking longer to see results.

    But just like people know that exercise is a good thing, no debt relief program works unless you do one simple thing - take action! And eventually, you'll get to the bottom of the snow covered "debt mountain."

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