WASHINGTON — While a growing number of companies are starting to offer 401(k) debit cards, the Securities and Exchange Commission is warning users about the fees and penalties involved.

A 401(k) debit card allows one to borrow up to $50,000 or 50% of the value of a retirement plan, whichever is less, through use of a debit card, SEC said in a July 29 investor alert.

The SEC said 401(k) debit card users are required to pay fees and interest on amounts borrowed from a 401(k). While some of the interest the user pays goes back into their accounts, a certain amount, called margin, is paid to the card's vendor.

Under IRS rules, if users don't repay the amount borrowed in five years or less and they miss three months of consecutive payments, taxes must be paid on the entire loan balance. Those younger than 59 1/2 years old must also pay a 10% penalty. Repayments of 401(k) debit card loans are not deducted directly from a user's payroll but must come directly from the 401(k) account holder.

Any money borrowed is set side in a money market fund until it is withdrawn. According to SEC, money market funds earn a lower rate of return than other investment options through a 401(k) account.