Britons are being misled into taking out Payment Protection Insurance (PPI) on their credit cards.
Almost 1.3 million people mistakenly believe that taking out PPI would improve their chances of being approved for a credit card, according to new research carried out by Which?
Just over 9.8 million people in the UK have credit cards with PPI attached. Of these, 13 % wrongly believe that getting PPI was a condition of their credit card deal or that their application was more likely to be accepted if they had it.
As each policy costs consumers an average of £127.60, it is easy to see why almost three in ten people were told by their providers that having it is a good idea. Credit card cover makes up the largest slice of the PPI industry, accounting for almost a quarter of PPI revenue, but only an average of 11 % is ever successfully claimed.
PPI is sold alongside credit cards, loans, finance agreements and mortgages to cover repayments if people are off work because of illness or unemployment. Credit and store card PPI often only covers the minimum amount that must be paid each month, meaning your balance may never reduce.
Doug Taylor, Personal Finance Campaigner, Which? says; "Credit card PPI is a modern day snake oil . It is a useless product, expensive and poorly designed. People want to be protected and have peace of mind, but credit card PPI, like a house of cards, does not give you the support you need. In this time of economic uncertainty, people are effectively throwing away money. No one should have to take out PPI on their credit card. Credit card PPI is the elephant in the room that can no longer be ignored."
Income protection insurance: News update: September 2008