In today’s post, I will show what a cancelled cheque is and how to cancel a cheque?
A cheque is a kind of slip that the bank provides to the bank account holder and agrees to pay a specific amount from the bank account. There are three parties to a cheque are:
- Drawer of the cheque: The person who signs the cheque or orders the bank to pay a specified sum of amount through a cheque is known as the drawer.
- Drawee of the cheque: The bank which is ordered to pay the specified amount as per the cheque is known as the drawee of the cheque.
- Payee: The person to who the bank is ordered to pay the amount is known as the payee.
What are the Types of Cheque?
There are multiple types of cheques such as open cheques, self-cheque, bank cheques, crossed cheques, stale cheque, cancelled cheque, etc.
What is a Cancelled Cheque?
A cancelled cheque means a standard cheque that crossed two lines and with the word “CANCELLED” written between those lines. You can cancel a cheque when you make any mistake like misspelling, wrong information, or want to provide it as a KYC, etc.
A cheque can simply be cancelled by mentioning the word “CANCELLED” on it. It is generally cancelled so that the cheque is not misused in any way by anybody.
You may also show a cancelled cheque as proof that you have a bank account. Even though a crossed cheque can’t be cash, but A cancelled cheque leaf can provide your account information such as account number, your name (as in the bank account), MICR code, bank name, and bank branch.
Cancelled Cheque Example
A cancelled cheque contains the same elements as a standard cheque. There are:
- Name of the bank
- Name of the branch
- Name of the account holder
- Account number
- IFSC code
When you see the cancelled cheque images, the difference will be noticeable. Also, the word ‘CANCELLED’ will be written across the cheque between two parallel lines. See the cancelled cheque format below:
How to Use A Cancel Cheque?
However, a cancelled cheque cannot be used to withdraw money, but there are several occasions where having a cancelled cheque can be beneficial. Some of them are:
- Know Your Customer (KYC) – Cancelled cheques can be used to verify the KYC when you are planning to invest in mutual funds or the stock market. A cheque has crucial information on it like the name and account number of the account holder and the name and branch address of the bank in which the individual holds an account.
- Equated Monthly Installments (EMI) – EMI full form is equated monthly installment, which is the monthly amount payments you make towards a loan that you opt for. It could be car loan, business loan, MSME loan, or personal loan. Banks might ask you for a sample cancel cheque to fulfil the formalities for your EMI.
- Demat Account – A cancelled cheque leaf along with other KYC documents need to be submitted to the stock brokerage when you are open a Demat account.
- Electronic Clearance Services (ECS) – ECS is an electronic mode of payment where a specific amount will be transferred from one bank to another. When you set up an ECS from your account, you need to submit a cancelled cheque to complete the process.
- Withdrawal of Employee Provident Fund (EPF) – You need to submit a cancelled cheque for verification when you withdraw funds from your EPF account.
- Opening A Bank Account – When opening a bank account, a cancelled cheque needs to submit for the process completion.
- Insurance Policies – Some organizations might ask you for a blank cancelled cheque when you are opening an insurance policy.
How to Write Cancelled Cheque?
When cancelling a cheque you need to be careful otherwise can be abused. Here are the steps to write a cancelled cheque:
- Step 1: Take a fresh cheque from your cheque leaf that you wish to cancel. Do not sign anywhere on the cheque.
- Step 2: Draw two parallel cross lines across the cheque.
- Step 3: Write “CANCELLED” between those two lines in capital letters.
Make sure the parallel lines you draw over the cheque leaf do not cover any important details such as the account number, the name of the account holder, IFSC code, MIRC code, name, and branch address of the bank in which the account exists, etc.
In case, if you already have made a mistake while writing a cheque you can still cancel it by following from Step 2. Even though no one can withdraw money from crossed cheque but still there are fraudsters who can misuse the cheque. This is why is it important when you give someone a cancelled cheque don’t put a sign on it.
Canceled Cheque FAQs
A cancelled cheque is a cheque that has been paid or cleared by the bank it was drawn on after it has been deposited or cashed. The cheque is “CANCELLED” after it’s been used or paid so that the cheque cannot be used again.
One can cancel a cheque simply by crossing it by two lines or writing the word “CANCELLED” between those lines. You can see a cancel cheque image above to understand.
Cancelled cheque is used as a proof that you hold an account in the given bank. It may be required to take a loan, open a bank account, investing in mutual funds, setting up Electronic Clearance Service, taking insurance policy and for other similar purposes.
No. You shouldn’t on a cancelled cheque. A cancelled cheque leaf can provide your account information such as account number, your name (as in the bank account), MICR code, bank name, and bank branch.
A cancelled cheque is a common KYC document and can be used for bank account verification. A cheque contains important details, like cheque number, IFSC code, account number and MICR code, and if the cheque is not crossed and cancelled, it can be misused should it fall in the wrong hands.
A cancelled cheque is a cheque that crossed with two lines and with the word “cancelled” written across.
These are the alternatives to cancelled blank cheques for confirming MICR and IFSC for an account.
1- Photocopy of the first page of the Passbook.
2- Copy of your account statement.
3- Many organization accept the photocopy of a cheque.
Yes, you can use the same cancelled cheque multiple times.
Yes, cancelled cheque can’t be used again, so no one can withdraw money from your account.