Hundreds of thousands of consumers have been misled into taking out Payment Protection Insurance (PPI) on their credit cards because they wrongly thought their application was more likely to be accepted, new research has found.

Just over 9.8 million people have credit cards with PPI attached, according to a survey by Which?, a consumer group. Of these, around 13 per cent - 1.3 million - bought it under the mistaken belief that it was a condition of the deal or would boost their chances of making a successful application.

A further 28 per cent of people said their credit card provider told them that having the cover was a good idea, even though many policies are riddled with exclusion clauses and are difficult to claim upon.

PPI is sold alongside credit cards, loans, finance agreements and mortgages to cover repayments if people are off work because of illness or unemployment.

But the insurance has come in for heavy criticism for being expensive and frequently mis-sold. A study by Citizens Advice found cases in which people who were unemployed or suffering from mental-health problems were talked into taking out PPI by high pressure salesmen even though they would never be able to claim.

In June, the Competition Commission issued a damning report on the PPI market in which it said consumers were being overcharged for the cover by £1.4 billion a year due to a lack of competition in the market. It said that only 11 per cent of claims are succesful and is considering a ban on the sale of PPI policies when consumers take out loans.

Advisers are rewarded handsomely for pushing PPI, taking up to 80 per cent of the first year's premiums as commission, according to the commission's report. Sales alongside credit cards account for 22 per cent of PPI sales with annual revenues of £970 million in 2006.

Doug Taylor at Which? said: “Credit card PPI is a modern day snake oil - it’s a useless product, expensive and poorly designed. As the credit crunch continues to take hold, people want to be protected and have peace of mind, but credit card PPI, like a house of cards, won’t give you the support you need.

“In this time of economic uncertainty, people are effectively throwing away £970 million each year, when they should be encouraged to seek independent financial advice about protecting their finances as a whole.”

Have I been mis-sold PPI?

If you can answer no to one or more of these questions, then you may have been mis-sold:

1. Did the adviser make it clear that the insurance was optional (if this was the case)?

2. Did the adviser tell you about the ‘significant exclusions’ under the policy? For example, the exclusion that states you won't be covered for any pre-existing medical condition, you might not be covered if you are over 65 or if you are self employed or on a fixed term contract?

3. Did the adviser make it clear that you would have to pay for the insurance up front in a single payment?

4. If you had to pay for the insurance as a single premium, did the adviser make it clear that the insurance cost would be added to the loan and you would be paying interest on it?

5. If your PPI policy expires before your loan or finance agreement does, you'll be paying interest on insurance that is no longer in force. Did the adviser make this clear?