Bank of America has finally taken a bold step that benefits cardholders, and could ultimately force other major banks to follow suit:

Bank of America is putting an end to overdraft fees on debit card purchases. It’s a customer-friendly maneuver that could cost the company millions of dollars in revenue short-term, but may also help increase its marketshare over the course of the next few years.

The move means that debit card holders who attempt to make a purchase that would drive their account into a negative balance will now simply be denied, rather than subjecting them to a $30+ fee that only sinks them further into the negative.

Debit card purchases currently account for nearly 60% of Bank of America’s overdraft fees, a substantial amount considering BOA issues more debit cards annually than any other provider. It currently has more than 37 million debit customers.

Last year alone, banks made more than $20 billion on overdraft fees from debit purchases and ATM transactions.

The changes should go into effect this summer.

The move may be a proactive measure to boost customer loyalty prior to the enforcement of a new federal reg on July 1st, which would force all debit and ATM providers to get account holders’ permission before they can allow overdrafts. In other words, cardholders would have the final say over whether they could sink themselves into a negative balance.

What do you think? Are these changes a step in the right direction, or will banks simply find another way to get around them?

Feel free to share your thoughts in the comments section below.

Source: “Bank of America Plans to End Overdraft Fees,” by Andrew Martin, New York Times, 3/9/10.