Debt Payoff Strategies
Debt Avalanche: Pay minimums on all debts, then put extra money toward the highest-interest debt first. This saves the most money in interest over time and is mathematically optimal.
Debt Snowball: Pay minimums on all debts, then put extra money toward the smallest balance first. This builds psychological momentum by eliminating accounts quickly, which helps many people stay motivated.
Minimum Payment Trap
| $5,000 Credit Card @ 20% APR | Time | Interest Paid |
|---|---|---|
| Minimum payment (~2%) | ~22 years | ~$6,700 |
| $150/month | ~4.5 years | ~$2,900 |
| $250/month | ~2.3 years | ~$1,400 |