[tchariya]

401K withdrawal/loan shouldn't incur a penalty (but interest on the borrowed amount exists). But like any loan, you have to pay it back. Most people forget that paying back into the 401K is with funds from your income that are taxed at your income level (could be as high as 33%).

If you don't pay it back, you default, then penalties get assessed and the amount you withdraw is also taxed as income at your level.

Borrowing from 401K to pay debt is very bad idea. If you don't have money to pay your credit card now, will you have the money built into your budget to pay back your 401K??

The best route is to never use your credit card unless you know you can pay it back. Also try to position yourself into a credit card with a lower interest rate. Also always pay more than your minimum or you will never beat your balance.