The question hinges on whether, given a choice, you should send in a little extra to a debt that you have that is smaller in amount or one that is larger in interest rate. You may think this is a no brainer but it’s actually more about psychology and less about math and it’s a topic personal finance guru juggernauts like Dave Ramsey have tackled in the past.

Dave Ramsey argues that you should pay off the smaller debt because the psychological boost you get from that will spur you towards paying off the other debts. Consider a $1,000 debt and a $10,000 debt and the ability to send an extra $100 with your payment. That extra hundred dollars is 10% of your smaller debt but a mere 1% of your larger debt, regardless of their interest rates. If you keep aggressively paying off your debt each month, you could conceivably erase the $1,000 debt in ten months – it would take you 100 months (it’s actually much more because of interest but we’ll leave it at that for simplicity’s sake). A lot can happen in 100 months and Dave argues that you should pay off the smaller one as fast as possible and then use that payment, which will no longer go to servicing the smaller debt, on the larger debt. This snowball will grow and grow until you’re debt free.

Now, the fallacy of this argument is that you’re paying off a debt that’s growing at a slower pace and with a slower starting amount. $1,000 at 20% will grow by $200 after a year; $10,000 at 20% will grow by $2,000 after a year – that’s a staggering difference of $1,800. As my friend Nickel has said in the past, poor Dave Ramsey is woefully bad at math!

What you should do is pay off your larger debt high interest and then, in the same fashion, use that payment to quickly accelerate the payment of your smaller debts. Don’t listen to Dave Ramsey on this one, it makes psychological sense but not financial sense.