As the economic downturn continues, clients who are retirement plan rich, but cash poor, will more frequently use 401(k) debit cards to pay for bills they can't quite manage with regular income. But as with all credit options, clients who misuse these cards may be asking for trouble.

According to the Securities and Exchange Commission, 401(k) debit cards allow consumers to conveniently borrow up to $50,000 or 50 percent of the value of their retirement plan. But many consumers forget that like a traditional credit card balance, 401(k) loans must be paid back … with interest.

Here are some tips to share with clients who are considering such cards:

• 401(k) debit cards aren't free. They will have to pay interest and may incur fees.
• Loan repayment is on a prescribed schedule (in five years or less and without missing three consecutive payments). If they fall behind, clients must pay taxes on the entire loan balance and a 10 percent penalty if they're younger than 59 1/2.
• The amount borrowed will earn a lower rate of return than the unborrowed portion of their plan.
• Clients must make loan payments directly to the plan provider and not rely on their employer's payroll deduction mechanism.

If your clients are careful with these cards, they can be a helpful source of emergency cash. But as with all forms of credit, self-discipline is key.