What Is A Cancelled Cheque And How To Cancel A Cheque?

December 21, 2023
how to cancel a cheque

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A cheque is a negotiable document that instructs the bank to pay a certain amount from the drawer’s account to whoever it is issued to or as per the direction of the designated person or holder of the cheque. There are several types of cheques, such as open cheques, stale cheques, self-cheques, crossed cheques, bank cheques, cancelled cheques, and so on. 

A cancelled cheque is one that has two parallel strike lines. It is used to guarantee that the cheque is not misused. Banks or financial organizations may require a cancelled cheque photo to check the correctness of a user’s banking information. These cheques must be shown as proof of a genuine bank account. A cancelled cheque may be worth more than you believe. A cancelled cheque may seem to be a non-transferable cheque, but it is one of the most vital and critical official papers needed by financial institutions or banks to confirm the customer’s banking credentials. 

It is thus important to know all about a cancelled cheque, why it is required, how to cancel a cheque and the risks associated with it. So, read on to get all the information regarding cancelled cheque. 

What is a Cancelled Cheque? 

As mentioned above, a cancelled cheque is one that has two lines crossed over it with the phrase “cancelled” written across it. It demonstrates that the person has a bank account. Other than that, there is no need to sign or write anything on the cheque. A cancelled cheque is simply used to collect information from the user such as – 

  • account number 
  • account holder’s name 
  • bank name  
  • branch name 
  • Magnetic Ink Character Recognition Technology (MICR) code  
  • Indian Financial System Code (IFSC).  

In a different context, a cancelled cheque is one that has already been paid. When a cheque is drawn for cash, the bank stamps it as cancelled. Once cancelled, the cheque cannot be used to authorize the withdrawal of further monies from the payer’s account. 

Also Read: Understanding the Salary Slip

How to Cancel a Cheque? 

A cancelled cheque is fairly easy to write. When cancelling a bank cheque, bear the following considerations in mind. 

  • Create two diagonally parallel lines across the cheque using a new cheque leaf. 
  • Just remember not to write anything else on the cheque, such as your signature, name, or amount. 
  • After drawing two parallel lines, clearly write the word ‘CANCELLED’ between the two lines in capital letters. 
  • Do not draw any lines that cover any important information on the cheque, such as the account number, IFSC code, MICR code, bank name, and so on. 
  • To put the term ‘CANCELLED’ on your cheque, always use dark, brilliant, and waterproof black or blue ink. 
  • To be extra cautious, flip the cancelled cheque leaf over and write the word “cancel” twice. 

No one can withdraw from such a cancelled cheque, although numerous fraudulent acts may occur even when the cheque is misused. To remain on the safer side, when you give someone a cancelled cheque, make sure you do not put your signature in it and that you pass it over to the correct person responsible for collecting it. 

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Why is a Cancelled Cheque Required? 

Completion of KYC 

You’ve undoubtedly heard about KYC! KYC is an abbreviation for Know Your Client. It refers to how financial organizations require different documents in order to adequately verify a person who participates in financial activity. Since the cancelled cheque proves your identity as a bank account holder and gives your banking credentials, it is one of the documents required when buying or selling stocks, mutual funds, or any other type of market-linked transaction.  

Financial institutions need this document as proof that the individual has a bank account, as well as the account bearer’s name and bank details, as well as the name and branch location of the bank. 

Electronic Clearing Services (ESC) 

An ESC allows you to execute paperless debit, credit, or other financial transactions between accounts. This is a method in which a service provider or investment business deducts a predetermined sum of cash from your bank account on a monthly, quarterly, semi-annual, or yearly basis.  

You may have authorized ECS to pay your monthly utility bills, such as electric, water, and internet. The service provider or investment company may require a cancelled cheque from which you want to have the funds withdrawn directly by the service provider or investment firm. This will supply the necessary information to the service provider or investment business, who will put it into their ECS system, and the cash will be withdrawn instantly when the time comes. 

For EMIs 

Your bank or Non-Banking Financial Corporation (NBFC) will want a cancelled cheque before completing your Equal Monthly Installments (EMIs) for a loan or credit amount. This is a necessity in order for your EMI payments to be processed. A cancelled cheque is often requested as verification of your bank account, in order to immediately debit your EMI money each month. 

Depository Account  

You will need to supply specific Know Your Customer (KYC) papers, such as evidence of identification and proof of residence, in order to create a Demat (Dematerialized Securities) account. In addition to these papers, you will be needed to provide a cancelled cheque. A cancelled cheque is often requested as verification of your bank account, which will be connected to your Demat account in order to purchase and sell shares. 

Insurance 

You will be needed to present documentation of your bank account when acquiring an insurance policy. A cancelled cheque is one technique to do this. A cancelled cheque acts as proof of your bank account, which may be required by the insurance company in order for premium payments and other financial activities relating to your policy to be processed. 

Cancelled cheque Example – 

It is the same as a traditional cheque. It is composed of the following elements: 

  • Bank Name 
  • Branch Name 
  • Account holder’s name 
  • Account Number 
  • MICR Code 
  • IFSC Code 

Also Read: EPFO Help: How to Find UAN Number Online

What are the Risks Associated with Cancelled cheque? 

Although a cancelled cheque cannot be used for any transaction, still there are some risk factors that you need to consider. Here is more information on it – 

  • A cancelled cheque cannot be used to withdraw money, although it may be used for fraudulent purposes. 
  • Never sign a cancelled cheque since fraudsters may easily replicate it. 
  • Although the cheque contains crucial information such as your bank account number, IFSC code, MICR code, name of the bank, and so on, be sure to pass it over to the correct and trusted person. 
  • If the presence of a sign on the cancelled cheque leaf is required. In such a case, always get a formal declaration or statement to back up your claim. 
  • If you suspect an illegal transaction has been conducted from your bank account, inform or warn the bank immediately. 

Be Mindful of Your Cancelled Cheque 

A cancelled cheque is one method of ensuring that no one has unauthorized access to your account. It saves information like the account holder’s name, account number, bank name, IFSC code and MICR code. Always avoid signing a cancelled cheque; otherwise, fraudsters may be able to replicate the same. 

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Frequently Asked Questions:

Does the Cancelled cheque require a signature?  

The cancelled cheque does not need your signature. The cancelled cheque will be utilized to get information such as the account holder’s name,  account number, MICR code, bank name and branch name, and IFSC. 

Can you cancel a cheque once issued?  

A cheque may be cancelled at any moment and for any cause. If you wish to cancel a cheque before it is cashed, you must write to the bank or the cheque’s issuer. When you cancel a cheque, you must provide the bank or issuer adequate notice (at least 30 days). 

What is the purpose of a cancelled cheque?   

A cancelled cheque serves as proof of payment and is commonly used for verification purposes when setting up a bank account, paying EMIs, purchasing insurance policies, mutual funds, and other financial transactions. It also serves as a part of Know Your Customer (KYC) requirements.

How long does a cheque take to cancel?  

The amount of time it takes to cancel a cheque varies by bank and location. Generally, it can take up to a few business days for a cheque to be fully cancelled and the funds to become available in the account again. It is best to cheque with your bank for specific details on their cancellation process. 

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