A sensible step to stopping overdraft fees?

In preparation for some new rules as a result of Congress addressing credit issues, Bank of America announced announced that beginning this summer it will only authorize single debit card transactions at the point of sale if a customer has enough money in their account at the time. So what does this mean for their customers, and potentially other customers of different financial institutions?

The impact on customers who use the debit card for purchases and are unaware of their balance will be protected from overdrafting their accounts if not enough money is available. This means no more $40 coffees for those who don't track their money. The bank admits that only about 14% of their customers consistently have this problem, but it does endear the bank to the public. Expect to see other banks follow suit soon.

There is a down-side to this also. Customers may also be able to access cash through the Bank of America ATM network where they will be alerted that the transaction might cause an overdraft and result in a fee. Additionally, there is no mention of what will happen to customers who have a combination ATM/credit card if they choose to charge a transaction rather than debit. Since a story mentioned that the ability to overdraw for a fee was being made available to those who prefer to pay bills with their cards, I'm guessing that they will be nailed with an overdraft fee.

Is Bank of America doing this as a purely altruistic gesture? Of course not. They're in business to make money. Expect them to tack on fees for other things, such as checking and such. Banks generate incredible amounts of revenue through fees, so they will make up through this loss in other ways. It wasn't a problem for the large majority of their customers, but more customers will feel the pain of fees in other areas later. This is my personal view of the situation.

What will happen with other institutions? Expect other banks to follow suit. This will be a victory for the consumer overall, but certainly does not replace the need for people to have a budget and plan where their dollars go. You need to commit to cutting your ties to debt that binds you.