If you know how compound interest works, and understand how minimum payments on a credit card are applied to a principal balance, you're ahead of the curve. Most Americans don't have that kind of financial know-how, according to survey released Wednesday by TNS, a market research group, and professors at Dartmouth College and Harvard Business School.

Only 35 percent were able to estimate how interest compounds over time, and even fewer understood the difference between paying in monthly installments versus in a lump sum.

(Questions from the survey are below. See how well you do.)

The survey also asked 1,000 people to assess their debt levels, and about one-quarter said they had "too much debt." Those tended to be younger, with lower incomes and larger families. Those who had excessive debt were "wildly wrong" when it came to calculating how long it would take to pay off a debt with compound interest.

Peter Tufano, financial management professor at Harvard Business School, says there's a strong link between financial literacy and excessive debt. "Those who severely underestimate the power of interest compounding don't understand how quickly debts can grow. They end up with more debt than they can handle," he said in a news release.

People haven't been educated or they've forgotten, and "it's costing them dearly when they get into debt," said Bob Neuhaus, executive vice president with TNS financial services. Credit card or other agreements are often complex and "the average consumer isn't focused on the details," he said. Financial institutions will have to pay more attention to financial literacy, he added.

Take the financial literacy quiz:

Question 1: Interest compounding
Suppose you owe $1,000 on your credit card and the interest rate you are charged is 20 percent per year compounded annually. If you didn't pay anything off, at this interest rate, how many years would it take for the amount you owe to double?
(a) 2 years
(b) Under 5 years
(c) 5 to 10 years
(d) More than 10 years
(e) Do not know

Question 2: Minimum payments on credit cards
You owe $3,000 on your credit card. You pay a minimum payment of $30 each month. At an Annual Percentage Rate of 12 percent (or 1 percent per month), how many years would it take to eliminate your credit card debt if you made no additional new charges?
(a) Less than 5 years
(b) Between 5 and 10 years
(c) Between 10 and 15 years
(d) Never, you will continue to be in debt

Question 3: Loaning money to the appliance retailer
You purchase an appliance that costs $1,000. To pay for this appliance, you are given the following two options: a) Pay 12 monthly installments of $100 each; b) Borrow at a 20 percent annual interest rate and pay back $1,200 a year from now.
Which is the more advantageous offer?
(a) Pay 12 monthly installments of $100 each
(b) Borrow at a 20 percent annual interest rate and pay back $1,200 a year from now.
(c) They are the same
(d) Do not know

ANSWERS:
Question 1: Correct answer (b), under 5 years. Only 35.9 percent of respondents got this correct.

Question 2: Correct answer (d), never. You will continue to be in debt; 35.4 percent got this correct.

Question 3: Correct answer (b), borrow at a 20 percent annual interest rate and pay back $1,200 a year from now. Only 6.9 percent got this right. In option (a), you're giving a free loan to the appliance retailer.