The Math Credit Card Companies Hope You Never Run
Meet Daniel. He's 34, and he carries three debts: a 9,000 credit card at 24% APR, a6,000 personal loan at 11%, and a $5,000 auto loan at 6%. Every month he scrapes together $300 in extra payments on top of his minimums, and every month he aims that $300 at whichever balance is bugging him most. Last month it was the auto loan, because the dealership keeps emailing. The month before, the personal loan. The credit card? He just pays the minimum and looks away.
Here's the trap. That 24% credit card is silently charging him roughly $180 a month in interest while his extra payments land on debts costing a fraction of that. Paying randomly feels productive. It isn't. The money he's throwing at the 6% auto loan would do almost four times more work against the 24% card.
The avalanche method fixes this with one rule: pay the minimum on every debt, then send every spare dollar to the debt with the highest APR. Not the smallest balance. Not the loudest creditor. The highest interest rate. Once that debt is gone, you roll its entire payment, minimum plus extra, onto the next-highest rate. The payment you send each month never shrinks; it just keeps cascading down to the next target.
Run Daniel's numbers through the avalanche order and the picture sharpens fast. With his $300 extra aimed at the 24% card first, then the 11% loan, then the 6% loan, he clears all three debts in about 52 months and pays roughly $6,100 in total interest. Paying the same $300 in his random, whichever-bugs-me order, he pays closer to $7,400 in interest and finishes months later. Same income, same $300, same debts. The only thing that changed was the order, and it saved him about $1,300.
That's the part nobody at the bank volunteers. The minimum-payment schedule is designed around their interest, not your freedom. Avalanche flips the optimization: it makes your dollars attack the most expensive debt while it's still expensive, before another year of 24% compounding piles on. Enter your balances, rates, and minimums above, add whatever extra you can commit, and watch the calculator sort your debts into attack order and show you the payoff date and total interest. The number that comes back is the cost of every month you keep paying in the wrong order.