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You've got a credit card, a car loan, maybe some Afterpay hanging around. You know you should be paying them down faster. But which one do you hit first?
There are two well-established methods to help you pay off debt faster. One is built around the maths of interest. The other is built around the psychology of getting rid of individual debts faster. Both work. The real question is which one is better for your debt situation.
Two Methods, One Core Idea
Both approaches share the same underlying mechanic. You keep making the minimum payment on every debt so nothing goes into default, then you direct every spare dollar at one specific debt until it's cleared. Once that debt is gone, you roll its entire payment, minimum plus extra, into the next debt on the list.
Each debt you clear frees up more money to throw at the next one, which is why both methods gain momentum over time.
The only thing the two methods disagree on is the order in which you attack them.
The avalanche method targets the debt with the highest interest rate first, regardless of balance. If your credit card is charging 19.7% and your car loan is at 12.5%, the credit card goes first — even if it has a smaller balance. The logic is purely mathematical: high-interest debt is the most expensive debt to carry, so clearing it first reduces the total interest you'll pay over the life of the payoff. This is the cheapest route to zero.
The snowball method targets the debt with the smallest balance first. If you've got a $600 Afterpay balance and a $4,200 credit card, the Afterpay goes first, even though the credit card is costing you more. The logic is behavioural: clearing a whole debt, start to finish, gives you a concrete win early on. That win builds confidence, and confidence is what drives momentum.
Everything else in the snowball-vs-avalanche debate is really just an argument about which kind of "optimal" matters more for you, the lowest total cost, or the highest chance of actually completing the payoff.
What the Maths Actually Says
Avalanche always wins on interest. You knock out the most expensive debt first, so total interest charges drop faster.
The gap is often less dramatic than expected. LendingTree researchers found that across multiple debt scenarios, the two methods can be "equally effective" in total cost — especially when balances are similar or when the high-rate debt is also one of the smaller ones(1).
In a typical NZ debt mix — credit card at 19.7%, car loan at 10–15%, personal loan at ~13.90%, student loan at 0% for NZ residents — the avalanche method might save you $300–$500 over the full payoff period. Real money, but probably not the deciding factor.
What the Behavioural Research Says
Here's where snowball starts winning.
A study analysing Federal Reserve Survey of Consumer Finance data across thousands of US households found that the snowball method substantially increases the chances of actually finishing(2).
The mechanism is straightforward: clearing a debt early — even a small one — registers as a win. That win fuels motivation. Motivation fuels consistency.
Avalanche asks you to grind away at your biggest, most expensive debt for months. No wins. No dopamine. Just discipline. And for most of us, pure discipline has a shelf life.
The snowball gives you something to celebrate early. That $600 Afterpay balance? Gone in six weeks. The $1,200 personal loan? Cleared by winter. Each one builds momentum for the next.
A Worked Example With Real NZ Numbers
Let's make this concrete. Say you're carrying:
- Afterpay: $600 at 0% (but 41% of BNPL users report missing at least one payment per year — so the risk isn't zero(3))
- Credit card: $4,200 at 19.7%
- Car loan: $8,500 at 12.5%
- Student loan: $17,500 at 0%
You've got $400/month to put toward extra repayments.
Avalanche order: Credit card, then car loan, then Afterpay, then student loan. Saves the most interest. But your first "win" — clearing the credit card — is roughly 10 months away.
Snowball order: Afterpay, then credit card, then car loan, then student loan. Costs a few hundred more in interest over the full timeline. But you clear the Afterpay in under two months and the credit card by month 12. Two wins in your first year.
How to Set This Up in SortMe
In SortMe, debt payoff lives inside the same goals and budgeting system you use for everything else. That means your payoff plan is always tied to what you can actually afford each pay cycle, so your extra repayments flow naturally out of your real budget rather than sitting in a separate tracker or spreadsheet.
There's a short setup to get it working. First, head to the Net Worth section and add each debt as a liability. Connecting the debt via Akahu is preferable, but many personal lenders are not connectable, so you need to add them to your net worth manually. This is what allows SortMe to track the debt, and in real time for connected accounts.
Once your liabilities are in place, create a Paid Debt Goal and attach the relevant liability to it. From there, you choose the timeframe in which you want the debt cleared. SortMe works backwards from that date and allocates the required amount into each budget cycle automatically. If you had $10,000 of debt and wanted it gone in 10 weeks, SortMe would add $1,000 a week to your budget as a debt repayment. If you wanted it gone in 20 weeks, that becomes $500 a week.
Because the repayments are shown inside your actual budget, you can immediately see whether the timeframe you picked is realistic. If $1,000 a week leaves your budget in a deficit, you'll know straight away, and you can stretch the timeframe out until the weekly number fits. It turns "I want to be debt-free by Christmas" into a question of what your budget can genuinely sustain without blowing up somewhere else.
Once you've decided on your plan, you'll then need to set up automatic payments in your banking app. Each debt will have its own payment. You'll need to cover the minimum payment, and then one of those payments will include your additional payment amount. Which one depends on your strategy.
Once one of the first debts is cleared, roll that repayment into the next one. No spreadsheet, and the progress updates automatically as payments come through.
So Which One?
The usual advice — avalanche if you're disciplined, snowball if you've stopped before — is a reasonable starting point. But in practice, the decision is usually shaped more by what your debts actually look like than by your personality.
If your interest rates are all within a few percentage points of each other — say a 12.5% car loan, a 13.9% personal loan, and a 14% credit card — the avalanche method doesn't make a lot of sense. You're talking tens of dollars in interest savings over the full payoff, not hundreds. In that case, snowball wins by default. You get the behavioural benefit at essentially no cost, and the order you attack debts in stops mattering very much.
If there's a clear high-rate outlier — a 22% credit card sitting next to a 6% car loan — and that outlier also happens to be your biggest balance, that's where the real trade-off lives. Avalanche saves meaningful money, possibly thousands, but you'll grind for months before a single debt hits zero.
This is the scenario where you need to be honest about your track record. If you've set plans like this before and quietly abandoned them, snowball. If you know you'll grind, avalanche.
The worst option is doing nothing. Paying minimums everywhere, or spreading extra payments evenly, costs the most and takes the longest. Pick one method, set it up in SortMe, and start. You can always switch later. The important thing is that the first debt hits zero.
Bonus Tip: Turn The Tap Off
Paying the balance off is only half the win. The other half is making sure the debt can't quietly reload the moment life gets expensive again. Credit cards and revolving facilities are designed to refill — that's the business model — so the real finish line is closing the tap.
Here's the bit that a lot of people don't realise: with most banks and credit card providers in New Zealand, you can ask them to stop new spending on the card while still keeping the account open to pay the balance down. You don't have to wait until it's at zero. You can freeze further use today and continue chipping away at the debt. It's a completely reasonable request, and under the Credit Contracts and Consumer Finance Act (CCCFA) lenders are expected to act responsibly and not push you into further hardship, which includes not pressuring you to keep a facility open that you're trying to escape(4).
Fair warning: phone staff sometimes try to talk you out of it. You'll hear lines like "but you'll lose your rewards" or "you might need it in an emergency." Push back on these. Ask them to block further drawdowns and keep the repayment arrangement in place. If they push back or claim it isn't possible, ask for it in writing and escalate — the Banking Ombudsman (for banks)(5) or the Commerce Commission (for other lenders)(6) are both free to contact.
Once the balance is fully paid, close the account properly.
To stay debt-free and not be shackled to lenders, start your short- and long-term savings accounts. This is an article for another day, but for now, focus on getting rid of your debt. With good strategy and good tools, you can free yourself from debt for good.
Sources
- Debt Avalanche vs. Debt Snowball: Which Is Right for You?, LendingTree
- Small Victories: Creating Intrinsic Motivation in Task Completion and Debt Repayment, Brown & Lahey, Journal of Marketing Research
- Buy Now, Pay Later Survey: 41% of Users Made a Late Payment, LendingTree
- Credit Contracts and Consumer Finance Act 2003, New Zealand Legislation
- Banking Ombudsman Scheme, bankomb.org.nz
- Commerce Commission New Zealand, comcom.govt.nz
