Master Your Debt: How the Avalanche Method Can Help You Save Big on Interest

Debts can add up fast—you swipe your credit card to cover an emergency expense, book that long-awaited vacation, or treat yourself to a well-deserved shopping spree. At the time, it feels like a smart move. And maybe it was.

But once the bills arrive and interest charges kick in, you might wonder how to pay it all off without getting buried in debt. Minimum payments may keep you afloat, but they also stretch your repayment timeline and inflate the final cost.

One way to take charge is through the avalanche method.

The sooner you learn how it works and start applying it, the easier it will be to clear your debts and maintain a good credit score.

WHAT IS THE AVALANCE METHOD?

The avalanche method of debt repayment focuses on eliminating balances with the highest interest rates first. Over time, it allows you to pay less in interest and save more money.

Here's how it works: you make minimum payments on all your debts but put any extra money toward the account with the highest interest rate. Once you settle that debt, you move on to the next highest, and so on. The term "avalanche" is fitting because your debt payoff gains momentum as you progress further.

Let's say you have a credit card with a 24% interest rate, a personal loan with a 12% interest rate, and a car loan with an 8% interest rate. The avalanche method suggests tackling your credit card debt first because the 24% interest rate adds up quickly if left unchecked.

This method prioritizes math over emotion. You're not going by the smallest balance (that's the snowball method); you're going by what's draining your money the most. It's about efficiency, not quick wins.

10 WAYS TO USE THE AVALANCHE METHOD FOR EFFECTIVE DEBT REPAYMENT

Don't let high-interest debts stop you from living your life. The sooner you take control, the easier managing your finances becomes. Here's how to get things back on track using the debt avalanche method.

1. List debts with interest rates
   
   To get the whole picture of your financial situation, lay out all your obligations, including credit cards, personal loans, and payday loans. Be sure to record their balances, interest rates, and minimum monthly payments.
   
   Consider using a budgeting app or website to easily adjust figures later on.
2. Rank from highest to lowest interest
   
   Sort your list so the debt with the highest interest rate is at the top. This step is your starting point. You'll tackle this one first while paying minimums on the rest.
   
   For example, you have the following debts with corresponding interest rates:

• Credit Card A: ₱45,000 at 24%
• Credit Card B: ₱30,000 at 20%
• Personal Loan: ₱80,000 at 10%

You can prioritize credit card A, regardless of its balance, due to its higher interest rate. When you pay for it first, you may have enough breathing room for the rest of your debts. Good repayment habits can also improve your credit reference.

3. Use a debt repayment calculator
   
   Plug your numbers into a calculator to see how much faster you can pay off your debt using the avalanche method. You'll also see how much you'll save in interest. Take a moment to review the data laid out, making the strategy feel more feasible and keeping you motivated.
4. Consolidate high-interest debts
   
   If you qualify for a lower-interest personal loan or a balance transfer credit card, consolidate some of your high-interest debt to save even more. Just make sure the fees don't outweigh the benefits.
   
   Some credit card companies, such as RCBC, offer 0% interest on balance transfers to make the monthly payments more manageable.
5. Automate minimum payments
   
   Do you struggle to keep up with or remember your debts? Consider setting up auto-pay for the minimum amount on every account to avoid late fees. This way, your credit remains in good shape while you focus extra payments on your top-interest debt.
6. Reassess interest rates regularly
   
   Interest rates can change, especially on credit cards. That's why you should keep an eye on your statements. If another debt suddenly increases its interest rate, reshuffle your list.
7. Apply windfalls to top-interest debt
   
   Are you eligible for a tax refund? How about a bonus at work? Perhaps you also have a side hustle that allows you to earn extra income. You can use those funds to pay off your highest-interest debt and speed up the avalanche. Then, you can allocate your primary income for important things, such as building your savings or purchasing essentials.
8. Track monthly progress
   
   Check your balances monthly to see your high-interest debt shrink. That momentum can help you stay on track. Any visual tracker, such as a budgeting app or a custom spreadsheet, might make the progress feel more real.
9. Be strategic with credit card use
   
   Support your progress by being mindful of new debt. While working to pay down existing balances—especially those with higher interest rates—focus on essential spending and manage your credit utilization wisely. Consider paying cash or through your debit card for non-urgent purchases, and use your credit card intentionally to maximize your financial momentum.
10. Maintain an emergency fund
    
    Nothing derails debt payoff faster than surprise expenses. Ideally, you have a small financial safety net to avoid incurring debt again. You can set aside ₱500 per week and increase it when more funds become available. Over time, that safety net grows.

MAKE YOUR AVALANCHE WORK

The debt avalanche method teaches you to pay your dues smarter. Tackling your highest-interest accounts first reduces the total amount you pay, freeing up more cash for things that truly matter, like savings, investments, or a much-needed vacation.

It takes discipline, yes. But the payoff—literally—is worth it.

And if you're looking for a credit card that aligns with your financial goals, RCBC Credit Cards offer options that support smart money habits. From balance transfer offers to tools that help you track spending, we can support your avalanche strategy every step of the way.

Explore RCBC Credit Cards to achieve financial security.