Paying Off Your Smallest Debt First Is A Waste Of Money

"Pay off your highest interest debt first. That's the only smart way to do it."

You've probably heard some version of that.

That's not true. Not because the math is wrong. It isn't. The debt avalanche method, where you attack your highest-APR balance first, really does save you the most money in interest. With average credit card rates sitting at 22.15% on balances that carry over month to month right now, that math matters a lot.

But saving the most money on paper only counts if you actually finish.

Back in 2012, researchers at Northwestern's Kellogg School got access to real payoff records for 6,000 people working through a debt settlement company. They weren't running a hypothetical. They were looking at what people actually did. The ones who paid off their smallest balances first, the debt snowball, were more likely to eliminate their entire debt than the ones who followed the "correct" avalanche order.

The researchers pointed to something simple. Closing out an account, even a small $300 one, does something a spreadsheet can't measure. It proves the plan is working. And that feeling is often the difference between someone who sticks with a payoff plan for two years and someone who quits after four months.

This isn't a small problem either. Americans are carrying $1.25 trillion in credit card debt right now, and total household debt just hit $18.8 trillion. Most people don't fail at getting out of debt because they picked the "wrong" order. They fail because they stopped.

The bottom line is this: the best method is the one you'll actually stick with until the last balance hits zero, and for a lot of people, that's not the one that looks best on paper.

Which one did you use to get out of debt — snowball, avalanche, or a mix of both?