As the name suggests Canceled Cheque is one that is crossed and the word “Cancelled” is written on it. Except this nothing has to be written on it. This is to avoid further usage of any transactions either by you or by anyone.
Although the Cheque is cancelled it can be used for various finance-related applications. It serves as proof that you have an account with a particular bank as all the primary details of your bank account are present in a cancelled cheque.
From the other perspective we can also say that when the bank finished withdrawing money from the payee account, it is stamped as cancelled which can not use further for any transactions.
Let us understand more about the cancelled cheque like the Purpose of cancelled cheque, How to write a cancelled cheque, uses of cancelled cheque, etc in this particular article.
Purpose of Canceled Cheque
A canceled cheque acts as a KYC(Know your customer) document which is used by the organization to validate your bank details and address as It has your account number, your name, MICR code, IFSC code, bank address on it.
Since it does not have your signature it is secure and it can be helpful for various organizations to validate your financial identity.
Also Read what is Bounced Cheque
How to Cancel a Cheque
The procedure to cancel a cheque is very easy. you can follow the steps mentioned below in order to perform it correctly.
- Pick a fresh cheque leaf from cheque book to cancel it. Make sure you do not put signature on it.
- Draw two Parallel lines across the cheque.
- Write the word “Cancelled” between the parallel lines drawn in Capital letter.
- Ensure that the parallel lines do not cover details like account number, account holder name, MICR code, name, and branch address of the bank.
Uses of Canceled Cheque
Most of us are not aware of the importance of cancelled cheque. here we will cover the uses of cancelled cheque. you can go through them.
- Opening a Demat Account
In order to hold the shares of listed companies on the Stock Exchange, you need a Demat account. A canceled cheque is needed to open a Demat account along with other KYC documents like ID proof, Address proof, etc.
- Electronic Clearance Service(ECS)
ECS is an electronic mode of funds transfer offering facility of transferring money from one account to another bank account, credit or debit transaction.
If you wish to register yourself for ECS in order to let the amount deduct from your bank automatically every month you need to submit a cancelled cheque for verification of account details.
- Insurance Policy
You need to submit a cancelled cheque to an agent or the company if you are purchasing any insurance policy. Similarly, when you want to terminate the insurance in between you need to submit cancelled cheque. This is to verify that the amount should get credit to the correct account.
- EPF Withdrawal
If you want to withdraw your PF amount you need to submit cancelled cheque either to the EPF office or to the online EPF portal.
The cancelled cheque helps the EPF department to confirm the right owner of the account hence crediting the withdrawal amount without any issue.
If you apply for any loan from a bank or any financial institution and you want to pay it through EMIs, you need to submit cancelled cheque there. The loan can be a Home loan, Car loan, education loan, etc.
Nowadays Know your customer(KYC) verification became essential almost at every place, so while purchasing mutual funds or any investment instrument you need to submit cancelled cheque to the organization.
- Bank Account Opening
If you are planning to open a new bank account with a particular bank you need to submit cancelled cheque to complete the process successfully.
Few More Reasons to Cancel a Cheque
There are a few exceptional reasons where you need to cancel the cheque as soon as possible. below you can find them.
- Cheque Lost
In case if you lost filled cheque leaf or blank one you must cancel your cheque as soon as possible to avoid its misuse. you need to report it to bank to cancel this your issued cheque.
- Misuse of cheque
If you know someone very close to you is cheating and misusing your cheque, cancel your check immediately and ask the bank to stop any payment that is pending.
Now that you know the importance of cancelled cheque, make sure to use it at the right place where it’s needed. However, you need to keep an extra eye on the person with whom you hand over your cheque.
1-Do I need to sign the cancelled cheque?
No, you do not need to sign the cancelled cheque. It acts only as a proof not for any transactions.
2-What information one can get from cancelled cheque?
You can get the Bank Branch address, person name, MICR code, and account number.
3-How to cancel a cheque?
Draw two parallel lines across the cheque and write the word “Cancelled” in between.
4-What if I lost cancelled cheque?
you need not worry as it not possible to withdraw money from your account. though it is always advised to be careful with your cheque.
5-Is it cancelled if I draw only two lines on the cheque?
No, Its not cancelled yet, you need to write “Cancelled” word in between.
6-Can I use cancelled cheque to avail EMI facility at retail outlet?
In case if you buy any consumer durable product that has the option of EMI with it and if you opt for EMI, then you will have to submit your bank’s canceled check. the canceled cheque will be asked by the financial provider through which you can finance your product.
7-To Invest in share market do I need to submit cancelled cheque?
In order to verify your account, a canceled cheque is needed.it will help the broker to have your account as proof of financial identity.