Annamaria Lusardi and Peter Tufano analyze debt literacy, financial experiences, and overindebtedness among Americans. Debt literacy is measured by questions testing knowledge of debt concepts and self-assessed financial knowledge. Financial experiences include borrowing, investing, and credit card usage. Overindebtedness is self-reported. The study finds that debt literacy is low, with only about one-third of the population understanding interest compounding or credit card workings. Lower debt literacy is linked to higher debt loads and more costly borrowing. Individuals with lower literacy are more likely to incur fees and use high-cost borrowing. The study also finds a link between debt literacy and overindebtedness, with less literate individuals reporting excessive debt or uncertainty about their debt position. The research highlights the importance of financial literacy in making informed financial decisions and avoiding overindebtedness. The findings suggest that lack of financial skills is a significant concern, particularly among women, the elderly, minorities, and those with lower incomes. The study contributes to the literature on financial literacy by examining the relationship between debt literacy and financial decision-making, as well as how both relate to overindebtedness. The results indicate that financial literacy is crucial for making informed financial decisions and avoiding debt problems. The study also finds that financial literacy is associated with better financial outcomes, including higher income and wealth. The research underscores the need for financial education to improve financial literacy and reduce overindebtedness.Annamaria Lusardi and Peter Tufano analyze debt literacy, financial experiences, and overindebtedness among Americans. Debt literacy is measured by questions testing knowledge of debt concepts and self-assessed financial knowledge. Financial experiences include borrowing, investing, and credit card usage. Overindebtedness is self-reported. The study finds that debt literacy is low, with only about one-third of the population understanding interest compounding or credit card workings. Lower debt literacy is linked to higher debt loads and more costly borrowing. Individuals with lower literacy are more likely to incur fees and use high-cost borrowing. The study also finds a link between debt literacy and overindebtedness, with less literate individuals reporting excessive debt or uncertainty about their debt position. The research highlights the importance of financial literacy in making informed financial decisions and avoiding overindebtedness. The findings suggest that lack of financial skills is a significant concern, particularly among women, the elderly, minorities, and those with lower incomes. The study contributes to the literature on financial literacy by examining the relationship between debt literacy and financial decision-making, as well as how both relate to overindebtedness. The results indicate that financial literacy is crucial for making informed financial decisions and avoiding debt problems. The study also finds that financial literacy is associated with better financial outcomes, including higher income and wealth. The research underscores the need for financial education to improve financial literacy and reduce overindebtedness.