Suppose you owe two debts and can put $400 a month towards them. Debt 1 is $4,000 at 8 percent, and Debt 2 is $12,000 at 21 percent. The avalanche method targets the 21 percent debt first, since the highest rate is doing the most damage, while the snowball method targets the $4,000 debt first because it is the smallest balance. Both keep paying the minimum on the other debt. Avalanche clears everything in about 57 months with roughly $6,754 of interest. Snowball takes about 68 months and costs about $10,991, so avalanche saves close to $4,238 here. The gap is large because the high-rate debt is also the bigger one, exactly the case where attacking the rate first pays off most.
Strategy
Time to clear
Total interest
How it is calculated
The calculator simulates both repayment orders month by month. For avalanche it sorts your debts by interest rate, highest first; for snowball it sorts by balance, smallest first. Each month it adds one month of interest to every outstanding debt, then applies your total payment, directing all spare cash to the first debt in the order until it clears, then rolling that freed-up money onto the next. It counts the months until every balance reaches zero and tallies the interest charged along the way. Avalanche is always the mathematically cheapest path because it removes the most expensive interest first. Snowball can clear a small debt sooner, which some people find motivating, but it usually costs more in total interest, and the calculator shows you exactly how much that motivation is worth.
Frequently asked questions
Why avalanche?
Mathematically optimal: highest-APR first minimises total interest. Snowball is psychologically motivating but pays more.
Does the ATO treat personal debt repayment differently from investment debt?
Yes. Interest on personal debts such as credit cards and personal loans is not tax-deductible under ATO rules. Interest on money borrowed to produce assessable income, for example a margin loan or an investment property mortgage, is generally deductible. Paying down non-deductible personal debt first is therefore the most effective use of spare cash after-tax.
What is the current interest rate environment in Australia?
The Reserve Bank of Australia sets the cash rate, which influences what lenders charge on mortgages, personal loans, and credit cards. As of mid-2025 the cash rate was 4.35 percent, but credit card APRs typically range from 12 percent to 22 percent regardless of the cash rate. Always check your actual contract rate before entering figures into this calculator.
How do minimum repayments work on Australian credit cards?
Australian lenders are required under the National Consumer Credit Protection Act to set a minimum monthly repayment, usually 2 percent of the closing balance or $25, whichever is greater. Paying only the minimum can extend repayment by many years and dramatically increase total interest. This calculator assumes you set a fixed monthly payment above the combined minimums.