People using credit cards spend more at once and underestimate purchase costs compared with consumers who use cash, a study shows.

"The studies suggest that less transparent payment forms tend to be treated like play money and are hence more easily spent," Priya Raghubir, a marketing professor at New York University, wrote in Monopoly Money: The Effect of Payment Coupling and Form on Spending Behavior.

The article appeared in the September issue of the Journal of Experimental Psychology: Applied, which is published by the American Psychological Association.

Raghubir said she wasn't at all surprised by her findings and argued that the perception of money as something to save is being eroded by the array of credit cards, gift cards, debit cards, value cards, even tokens. All of those spending options remove what Raghubir calls the "pain of paying."

"The more transparent the payment outflow, the greater the aversion to spending, or higher the 'pain of paying,'" she wrote with co-author Joydeep Srivastava, an associate professor of marketing at the Robert H. Smith School of Business at the University of Maryland.

"It's a way to get people to spend without thinking of every penny, and that could be a good thing or a bad thing," said Raghubir, in an interview with CBC News Online.

People are most likely to underestimate purchase costs when they buy several things at once. It's only when they are forced to add up every penny that they begin to realize exactly how much they're out of pocket.

And as the array of credit options increases, the authors warn consumers could be more vulnerable to amassing unmanageable debt, particularly groups like teenagers and gamblers.

Increase 'pain of paying'

The authors gathered data from four studies. Two studies examined consumer behaviour by having participants estimate the cost of meals that were described in detail. Two other studies examined how people spent differently when given the same amount of money in cash versus credit.

So is there anything people can do to increase "the pain of paying" when they use their credit card, or it is best to just cut them up?

"You should pay a lot of attention to your credit card bill every month, keep track of details of your spending, and set goals every month for reducing your balance," said Raghubir.

And is Raghubir the type of shopper who only uses cash, knowing all of her research?

"I try to put everything on my card and then pay off the balance every month, " she said, but added that this month she was, uncharacteristically, a little behind.

"I'm my own example," she said, laughing.