This study uses quantitative analysis to investigate the relationship between financial literacy and credit usage in the banking sector in Sri Lanka. A sample of 210 respondents from various regions, including the rural Welioya and urban Colombo Fort, was selected to provide diverse perspectives on financial behaviours. Financial literacy, the independent variable, was assessed through respondents' knowledge in critical areas: interest compounding, inflation, time value of money, returns, and risk management. These components represent the fundamental financial understanding necessary for informed credit decisions. The dependent variable, banking sector credit usage, included various forms of credit such as personal loans, credit cards, and mortgages. Data were collected through structured interviews and questionnaires, comprehensively capturing respondents' financial knowledge and credit usage behaviours. The data were analyzed using SPSS software, facilitating robust statistical analysis. Descriptive statistics showed satisfactory financial literacy and banking sector credit usage levels, indicating basic financial proficiency and active engagement with banking credit facilities. Further inferential analysis using correlation and regression tests revealed a significant positive correlation between financial literacy and banking sector credit usage. Individuals with higher financial literacy were likelier to utilize banking credit effectively and responsibly. These findings underscore the critical role of financial literacy in enhancing banking sector credit usage. Improved financial literacy leads to better understanding and management of credit, contributing to more stable personal finances and overall economic well-being. For policymakers and educators in Sri Lanka, these insights highlight the importance of financial education initiatives. By investing in programs that boost financial literacy, it is possible to foster more informed and prudent credit usage, ultimately contributing to the stability and growth of the national economy.