PPI for credit cards costs customers nearly £1bn a year says Which?
Many people are still being misled into buying payment protection insurance (PPI) to cover their credit card payments, Which? claims.
A survey for the consumers' association suggests that nearly 10 million people have a PPI policy with their cards.
But 13% - 1.3 million - bought it under the mistaken belief it was compulsory or would improve their chances of having their card application approved.
Which? said people were wasting their money buying any form of PPI policy.
"Credit card PPI is a modern day snake oil - it's a useless product, expensive and poorly designed," said Doug Taylor of Which?
"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," he added.
This was rejected by the British Bankers Association (BBA), who said the insurance was a valuable "plan B".
"Taking out PPI is not a condition for agreeing to provide the borrowing facility and people are free to shop around if they want to," a BBA spokesperson said.
"Last year, a mystery shopping exercise carried out by the FSA showed improvements in staff making it clear to customers that cover is optional and new rules which came into force in July tighten the PPI regime even further," the spokesperson added.
PPI is designed to ensure that people can still repay their loans, such as credit card payments or mortgages, if they fall ill or become unemployed.
Consumer bodies such as Which? and Citizens Advice have long campaigned against the selling of PPI, describing it as little more than a protection racket run by the banks to boost their profits.
In June this year the Competition Commission calculated that customers were being overcharged for the insurance policies each year because of a lack of competition at the point of sale.
Meanwhile the main financial regulator, the Financial Services Authority (FSA), has fined 11 financial organisations in the past two years for mis-selling the insurance.
The most high-profile example was that of the Liverpool Victoria friendly society - now called LV - which was fined £840,000 earlier this year.
Its staff had tagged on the cost of PPI insurance to the quotes it gave to 14,500 customers who had asked for personal loans - but without telling them it was doing this.
The Office of Fair Trading (OFT) has also criticised PPI policies for frequently exaggerating the level of cover on offer.
Despite the barrage of bad publicity over the past few years, and the increased regulatory scrutiny, PPI polices are still widely sold.
Cover for credit cards repayments is the second most common form of PPI.
Which?'s survey of 2000 adults in the UK found that 32% of those with credit cards had also bought a PPI policy as well.
Of those, 13% said they believed that taking the cover was a condition of being given the card, or that their card application was more likely to succeed if they did so.