Which Debt Should You Pay Off First?

When you're carrying several debts at once, it can feel like standing in front of a fire with a single bucket of water, unsure where to throw it. Credit card here, student loan there, car payment in the mix. Where do you even start?

The good news: there's a simple way to decide. And once you have an order, the fog lifts and you finally have a plan you can follow.

Let me walk you through the two main approaches, when each one makes sense, and the rule of thumb I come back to most often.

First, one thing that matters more than method

Before we compare strategies, know this: the best debt payoff plan is the one you'll actually stick to. The math matters, but so does your motivation. The "perfect" plan you abandon in two months is worse than the "good enough" plan you follow for two years. Keep that in mind as you read.

The two proven approaches

There are two well-known methods, and they differ in one key way — what you attack first.

Both work. The avalanche wins on math; the snowball wins on psychology. Which is right for you depends on what you need more of right now — savings or momentum.

My rule of thumb: start with high-interest debt

If your debts are relatively close in size, I usually point people toward the avalanche — start with the highest interest rate. And in practice, that very often means the credit card comes first.

Here's why. Credit cards frequently carry interest rates of 20% or higher, while student loans, car loans, and mortgages are usually much lower. That high-interest credit card debt is the fire spreading fastest. Every month you leave it burning, it costs you far more than the lower-rate debts. Knock it out first, and you free up the most money the quickest.

Attack the debt that's charging you the most. That's usually the credit card — and it's usually the one keeping you up at night, too.

Once the credit card is gone, take the full payment you were making on it and roll it onto the next debt — say, a student loan. Then the next. This is the "roll-down" effect, and it's how people who felt stuck for years suddenly find themselves debt free faster than they imagined.

When I'd choose the snowball instead

If you've tried to pay off debt before and lost steam, or if the sheer number of debts feels crushing, the snowball can be the better human choice. Paying off one small balance completely — actually crossing it off — creates a burst of momentum that keeps you going. Sometimes that early win is worth more than the interest you'd save.

There's no shame in choosing motivation over math. I'd rather see you finish the race with the snowball than quit halfway through the avalanche.

A simple way to start today

• List every debt: the balance, the minimum payment, and the interest rate.
• Keep paying every minimum, always — never miss those.
• Pick your target: highest interest rate (avalanche) or smallest balance (snowball).
• Throw every extra dollar you can find at that one target.
• When it's gone, roll that entire payment onto the next one. Repeat.

That's it. One target at a time, momentum building with each payoff. It's not complicated — it just takes a plan and the discipline to follow it. And you don't have to do it alone.