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What Is a 401(k) Debit Card?

Definition: 401(k) Debit Card


A 401(k) debit card is deceivingly like the debit cards you're familiar with, except the money is drawn from your retirement savings and must be paid back to yourself with interest — essentially, it is a loan against your 401(k). You're responsible for making punctual payments, and if you miss one, you risk having to pay early withdrawal penalties.

While you'd be paying interest now, you'd really be borrowing from your future self. When you remove funds from your retirement savings it reduces the potential for compounding interest, therefore hurting your overall long-term savings goal and strategy. Do yourself a favor and pretend that 401(k) debit cards don't exist; you'll be grateful when you need to rely on those funds for living.

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