Interest Cost Method
Stop the biggest dollar leak first (balance × APR).
How it works
The interest cost method is a dollar-weighted cousin of the avalanche. Instead of ranking by interest rate, it ranks by the actual dollars each debt costs per year — balance multiplied by APR.
This matters because a large balance at a moderate rate can quietly cost more real dollars than a small balance at a high rate. Attacking the biggest dollar leak first stops the most bleeding.
Use the effective APR for each debt (especially credit cards, which compound daily) so the ranking reflects true cost.
Pros and cons
Pros
- Targets the largest real-dollar interest drain
- Often close to avalanche, sometimes better in practice
- Intuitive in absolute-dollar terms
Cons
- Needs accurate APRs to rank correctly
- Not a widely standardized named method
Who it's best for
The Interest Cost is best for people with a mix of large and small balances who want to stop the biggest dollar leak first.
The only way to know if this is the fastest, cheapest plan for your debts is to run the numbers. The calculator compares this method against five others on your actual balances and rates.
Compare other methods
Debt Snowball
Pay the smallest balance first to build unstoppable momentum.
Debt Avalanche
Pay the highest interest rate first to pay the least total interest.
Smart Cascade
Free up cash flow fastest by blending payoff speed with interest.
Cash Flow Index
Clear the debts that tie up the most cash per dollar owed.
Highest Payment
Eliminate your biggest required payment first for instant relief.