Credit card debt is an increasing problem for many Americans. It seems insurmountable, but it can be overcome. It just needs to be conquered one step at a time, and the first step is understanding how it works.

The Financial Literacy Quiz is a great tool for that. Created by the Financial Industry Regulatory Authority (FINRA) as part of its National Financial Capability Study, the quiz is only 6 questions long. The resulting data has been used to gauge Americans’ financial capability since 2009. The quiz was updated in 2015 to include a question for credit card owners, screencapped below. If you’re curious, click the link above and take it the quiz yourself. It’ll only take five minutes.  

FINRA Question.jpg

Credit: FINRA

How do you feel after taking that? If the answer is “not good,” you are far from alone.

That survey was sent to 27,564 adults in all 50 states and Washington D.C. Approximately 500 adults per state answered the same questions you just did. 63% got half the questions wrong.

37% correctly answered four of the five returning questions, despite presumed familiarity with them (39% correct answers in 2012, and 42% correct answers in 2009).

The credit card debt answers weren’t reassuring, either. 33% of respondents answered “2 to 4 years,” which is correct. 29% thought it took “5 to 9 years” which is a much longer timeframe than it actually takes for interest to double. Given the close percentile ranking of those two answers, the study suggests that most Americans don’t understand the difference. If almost as many Americans think it takes over four times as long for interest rates to double than they actually do, it means they’re allowing vast amounts of debt to sneak up on them.

All that said, the assumed knowledge consumers were supposed to have to correctly answer the questions seems a bit niche. I’m not sure how I was supposed to learn “the rule of 72” as applied to calculating interest rate inflation, and I got all 6 questions right.

Still, the root cause for these results isn’t knowledge-based; it’s over-confidence. 76% of respondents rated themselves as having a “very high” understanding of financial knowledge, a sharp increase from 67% who said the same thing in 2009. “Americans tend to have positively biased self-perceptions of their financial knowledge,” the study reports. We also “have difficulty applying financial decision-making skills to real life situations,” despite claiming otherwise:

When asked how good they are at dealing with day-to-day financial matters (such as managing checking accounts and credit cards), a large majority of Americans rated themselves positively (81%). However, even among the 42% of respondents who gave themselves the highest score (7 on a 7-point scale), nearly three out of ten (29%) engage in costly credit card behaviors (paying the minimum payment, paying late fees, paying over the limit fees, or using the card for cash advances), 18% use non-bank borrowing methods, and 12% overdraw their checking account.

 Self-response chart.jpg

Credit: FINRA

The difference between presumed literacy and daily action is a disconnect between “perceptions and actions in day-to-day financial matters,” as the study describes it. It may actually be something else, according to psychology professor John D. Mayer: we think our future selves are completely separate people from our current selves. Worse still, we think our future selves are “this annoying other person who wants to prevent you from having fun in the present,” as the New York Times explains. Brain scans show different regions of the brain acting up whether we think about ourselves or other people; most people have the “other person” region light up when thinking of their future self.

Thankfully, this can be overcome. All you need to do is create a concrete image of who you want your future self to be. By focusing on that image, you can trick your brain into believing you’re the same person and help yourself achieve your long-term goals. As Mayer puts it, “those of us who focus more on what lies ahead often shape our lives in ways that make good sense for our future.” You can “encourage [yourself] to identify more with [your] future, to take on the stewardship of [your] present life and guide [yourself] to attain [your] goals.”

As illuminating as that information is, it doesn’t help you pay down credit card debt. Here’s Aaron Patzer, CEO of personal finance platform Mint.com, explaining your next steps:

how-to-save-money-the-right-way