A Card to Borrow Your Future

Franco Modigliani, left, and Francis Vitagliano, in Modigliani's MIT office about 10 years ago, patented the card idea. (Halyna Vitagliano -- Courtesy Of Francis Vitagliano)

What about the chance for people to replace those high-interest-rate credit cards? The major credit card companies lobbied hard to derail the concept.

Facing the political heat, Banc One dropped the idea.

The mettle of the two men was next tested when they were offered up to $10 million to sell their patent. Should they cash in and take a sure thing, or should they wait and pursue the prospect of greater profits through royalties in the future? Ultimately, fearing the card would not be introduced properly without their hands-on involvement, they rejected the millions and decided to continue their quest.

Over the ensuing years, they sometimes spoke about the millions they had passed up. And their frustration mounted as they made one false start after another.

The running joke in Vitagliano's household was that he was lucky to have married a psychiatrist, because there was no other way he could have afforded the therapy needed to endure the anguish. Vitagliano's wife, Halyna, put it in simpler terms: She would not buy curtains for the living room in their townhouse until the new credit card was introduced.

The impending arrival of the 401(k) card is a victory for Vitagliano, whose favorite expression is a childlike "Oh boy!" and who has kept himself fresh by pursuing the invention with vigor while working in a series of pension-compliance jobs to pay the bills.

Years ago, before entering the pension field, Vitagliano did intelligence work at the National Security Agency. That sense of adventure and intrigue remained with him through the years, as he and Modigliani suffered setbacks.

"The journey has been fascinating," Vitagliano said. "If all we really wanted was to make money, we would have taken the money we invested in getting the patent and bought a fast-food franchise. Our commitment has been to the value of the invention and that it be implemented properly."

New Monthly Bills

Here's how the new 401k card would work:

Individuals with money in 401(k) savings plans would, if their employers permit, be able to purchase the new card for a $50 annual fee, enabling them to borrow money for routine purchases or major expenditures or, as with an ATM card, just to have cash readily available. They would not be permitted to borrow more than $10,000, or 40 percent of the money in the account, whichever is smaller. Furthermore, loans made with the card would not be subject to the tax penalties usually associated with early withdrawal from the retirement account.