What is the fastest, cheapest way to clear my debt?

Most U.S. issuers use the greater of a percentage of the statement balance — typically 1% to 3%, plus that month’s interest and any fees — and a fixed dollar floor, commonly $25 to $40. The exact formula is in your cardholder agreement, which is why both the percentage and the floor are editable fields here rather than fixed assumptions. The key property is that the percentage minimum falls as the balance falls, which is what stretches the payoff out.

On a $6,500 balance at 22.5% APR with a 2% minimum, the payoff runs for well over a decade and the interest can approach or exceed the original balance. Because the required payment shrinks alongside the balance, each month a larger share of what you pay goes to interest. Every U.S. statement carries a required minimum-payment warning box for this reason: compare its 36-month figure with the minimum-only figure here.

You pay every minimum on every debt, then send all spare money to the debt with the highest APR. When it clears, its minimum rolls into the next-highest APR debt, and so on. Mathematically this always produces the lowest total interest and the shortest total payoff, because you are always attacking the most expensive dollar first.

Snowball targets the smallest balance first regardless of rate, so you clear whole accounts quickly and get visible wins. It always costs at least as much interest as avalanche — usually a few hundred to a couple of thousand dollars more — but behavioural research and plenty of real-world experience say people finish it more often. If the gap in your case is small, the method you will actually stick to is the better one.

It depends entirely on the spread between your APRs and the spread between your balances. If your highest-APR debt is also your smallest, the two methods produce the identical order and save exactly the same. The gap widens when a large balance carries a much higher rate than a small one. The breakdown here runs both simulations month by month and shows the dollar and month difference for your actual numbers.

Because the interest is charged first. At 22.5% APR, a $6,500 balance accrues roughly $122 in interest in month one. A $150 payment therefore reduces the balance by only about $28. If your payment is at or below the first month’s interest, the balance never falls at all — it grows. The breakdown shows that first-month interest figure explicitly so you can check where your payment sits.

Simple interest is charged only on the original principal; compound interest is charged on principal plus accumulated interest. Credit cards compound daily on the average daily balance, which is why the effective annual cost is slightly higher than the stated APR. Most amortizing loans — mortgages, auto loans, personal loans — charge interest on the outstanding balance each period, so paying principal down early is what reduces the total cost.

A 0% balance transfer can be excellent if you can clear the balance inside the promotional window, but factor the 3%–5% transfer fee into the comparison and know the go-to rate. A consolidation loan replaces revolving debt with a fixed term at a fixed rate — helpful for discipline, but it only saves money if the new APR beats the weighted average of what you have. In both cases the risk is the same: the freed-up cards get used again.

Under the One Big Beautiful Bill Act, up to $10,000 of interest per year on a qualifying auto loan is deductible for tax years 2025 through 2028, and you do not need to itemize to claim it. The vehicle must be new, for personal use, with final assembly in the United States; the loan must be secured by the vehicle and originated after December 31, 2024. The deduction phases out by $200 for every $1,000 of MAGI above $100,000 for single filers and $200,000 for joint filers, disappearing entirely $50,000 above each. Confirm the rules for the year you are filing before relying on it.

A lease payment covers only the depreciation over the lease term plus a rent charge, so it is almost always lower than a loan payment on the same car — and at the end you own nothing. Buying costs more per month but the payments stop, and the residual value is yours. The honest comparison is total cost over the number of years you actually keep a vehicle: if that is well past the loan term, buying usually wins; if you replace the car every three years anyway, leasing can be competitive. Note that the interest deduction above applies to purchase loans, not leases.

The common ordering is: a small starter emergency fund of a few hundred to a thousand dollars, then any employer retirement match, then high-rate debt, then a fuller emergency fund. The logic is that without any cash buffer, the next unexpected expense goes straight back onto the card you just paid down, and you end up running in place at 22% APR.

Paying down revolving balances lowers your credit utilisation ratio, which is one of the largest factors in most scoring models, so the effect is normally positive and fairly quick. Closing the account afterwards is the part that can hurt: it removes the available credit from the utilisation calculation and, eventually, shortens your average account age. Paying to zero and leaving the account open is usually the better outcome.