A cancelled cheque is a cheque that has already been paid by the bank and is marked with the word ‘CANCELLED,’ indicating that it is no longer valid for making payments. This marking is typically written across its face between two parallel lines.
What is a Cancelled Cheque?
A cancelled cheque is a financial tool, notated by the word “CANCELLED” written prominently across it, with two crossed lines. While its primary purpose is to prevent misuse, it is an essential proof of one’s bank account. Cancelling a cheque is very important to safeguard your financial transactions.
This modest yet influential instrument carries vital information, including the account holder’s name, account number, MICR code, IFSC code, branch details, and cheque number. While it cannot withdraw funds, it finds utility in verifying bank details, Electronic Fund Transfers (EFT), KYC requirements, and other financial transactions.
When would you need a cancelled cheque?
- Mutual Funds: If you are investing in mutual funds or the stock market, you must open a Demat account. The company would want you to submit a cancelled cheque to open the account to verify if the bank account associated with the investment is yours in reality. The requirement of the cancelled cheque is in accordance with the Know Your Customer (KYC) guidelines.
- EMI: Equated Monthly Instalments (EMI) is the most sought after method of payment when you are buying a gadget or a high-value item. Individuals pay monthly instalments even in the case of loans such as car loan, home loan, education loan, and personal loan. To initiate the process of monthly instalments, you must submit a cancelled cheque as proof of having a bank account.
- Electronic Clearance Service: An electronic clearance service automatically deducts money from your account every month for any transaction you have done. In this case, you must set up the electronic clearance service.
- Provident Fund Withdrawal: Companies generally ask for a cancelled cheque when you want to withdraw your EPF money.
FAQs
How to cancel a cheque?
ou can simply cancel a cheque leaf by drawing two parallel lines over it and writing “cancelled” in between the lines. You should not sign 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. Even though fraudulent activities using cancelled cheques are too rare, you should still make sure that the person or institution to which you hand over your cancelled cheque is highly reliable.
What does a cancelled cheque denote?
A cancelled cheque works as a proof for opening an account with a bank. You can submit a cancelled cheque in many cases to confirm your bank account details.
