Connect with us

Hi, what are you looking for?

Banking

A Cancelled Cheque and Its Purpose

What is a Cancelled Cheque

A cheque with two parallel lines drawn across it with the word “CANCELLED” written in between is called a cancelled cheque.

A cancelled cheque has the bank and account details, such as bank name, account number, account holder’s name, MICR code, IFSC code, etc. Some legal procedures require you to submit a cancelled cheque to prove that you have an account at a particular bank. But if you submit a blank cheque, someone may misuse it and withdraw funds from your account. So, to prevent this occurrence, you have to submit a cancelled cheque.

How to write a cancelled cheque?

Cancelling a cheque is an easy process.

Step 1: You have to draw two parallel lines across the cheque

Step 2: Then write the word “CANCELLED” on it.

Note : You don’t have to sign the cheque or write any details. As this cheque only works as proof of your bank account, there is no need to make an entry on the cheque.

Note : Make sure you do not write over the cheque’s vital aspects, such as the account number, account holder’s name, MICR code, IFSC code, bank address, etc.

You also need to hand it over only to the person concerned as misplaced cheques can be misused. Remember not to sign a cancelled cheque because miscreants can use the details and signature to withdraw funds from your account fraudulently.

When Do You Need Cancelled Cheques, Use of a cancelled Cheques?

Cancelled cheques are mainly used as proof of bank account. However, there are a few more places you can use a cancelled cheque:

  • Loan applications:

While applying for a loan, the bank will ask you to submit a cancelled cheque.

  • EMI payments:

When you buy any item on an EMI basis, the financial institution will ask you for a cancelled cheque.

  • Mutual funds:

When you invest in mutual funds, the investment organisation asks you to submit a cancelled cheque for verifying your KYC details.

  • PF withdrawal

If you withdraw your Provident Fund (PF) offline, the EPS office will ask for a cancelled cheque to confirm that the concerned individual is you and not someone else.

  • ECS:

The bank requires a cancelled check if you opt for the Electronic Clearance Service (ECS) to automatically deduct funds from your account.

  • Insurance:

Insurance companies ask for cancelled cheques while issuing an insurance policy.

Conclusion

Even though we do not use cheques frequently, it is important to have a chequebook. Many banks and financial organisations require you to submit a cancelled cheque as proof of account at a particular bank. Cancelling a cheque is quite easy. The only thing you have to remember is to keep all the important details on the cheque visible.

FAQs on Cancelled Cheque

What is the correct method to cancel a cheque?

You have to strike two parallel lines across the cheque and write “CANCELLED” between them.

What colour pen should I use to cancel a cheque?

You can use only blue or black coloured pens to cancel a cheque. No other ink is accepted by banks and financial organisations.

Should I sign a cancelled cheque, Is it Necessary to Sign a Cancelled Cheque?

No, you should not sign a cancelled cheque.

Can I instruct the bank to cancel a cheque on my behalf?

No, only you can cancel your cheque. The bank does not have the authority to do so.

Can a cancelled cheque be used to withdraw money from my account?

No, a cancelled cheque is void. It cannot be used to withdraw money from your account.

Is it risky to lose a cancelled cheque?

A cancelled cheque cannot be used to withdraw money and does not contain your signature, it is relatively harmless if you lose a cancelled cheque. However, the cancelled cheque contains all other details such as bank address, MICR number, IFSC code, account holder’s name, etc. So, it is better to inform the bank of its loss as soon as possible to avoid fraudulent activities.

Do I need to cancel different cheques for different transactions?

No, if you already have a cancelled cheque with you, you do not need a fresh cancelled cheque for a new transaction.

How is Cancelled Cheque Different from Bounced Cheque?

A cancelled cheque is the one that cannot be used to withdraw money or do monetary transactions whereas a bounced cheque is the one where the cheque is rejected by the payee's bank due to insufficient balance in the payers account or due to instructions provided by the payer.

Also Read:
Post Dated Cheque