List all debts ranked by interest rate, highest to lowest

Sort every debt by APR descending — this single ordering is the entire strategic decision of the avalanche method.

Why it works

The avalanche’s mathematical advantage comes entirely from the ordering: paying down the most expensive debt first reduces the rate at which interest accrues across the portfolio. Every dollar applied to a lower-rate debt while a higher-rate debt is outstanding costs the difference in rates annually. Making the ranking explicit and visible converts an abstract principle into a concrete action sequence.

How to do it

1. List every debt with its current balance, minimum monthly payment, and APR.
2. Sort by APR from highest to lowest.
3. Identify the top-ranked debt — this is the target for all extra payments until it is paid off.
4. Note the effective monthly interest cost of each debt (balance × APR / 12) so the cost difference is tangible.

Evidence

The mathematical optimality of highest-interest-rate-first repayment is an arithmetic fact, not an empirical claim — for any set of debts with different interest rates, paying the highest rate first minimizes total interest paid. Research confirms that most consumers do not use this approach. (observational)

Gathergood et al. find that consumers cluster payments on the account with the highest balance more often than the highest interest rate, suggesting the avalanche requires deliberate setup to override default behavior.

Sources

• Gathergood et al. (2019), how do individuals repay their debt, American Economic Review

Common mistake

Using the minimum payment column to set priority rather than the APR column — minimum payment size is a creditor-set variable unrelated to the cost of the debt.