Have you ever issued a cheque to someone and then regretted it? Maybe you made a mistake in writing the cheque, or you changed your mind about the payment, or you suspected some fraud. Or maybe you just needed to prove that you have a bank account for some reason. In any of these cases, you would need to cancel your cheque and prevent it from being misused.
You may also need to cancel a cheque for various reasons, such as filing for withdrawal from EPF or providing proof of having a bank account.
In this blog, we will explain everything on how to cancel a cheque and the situations when you might need to make a cancelled cheque.
What is a Cancelled Cheque?
A cancelled cheque is usually represented as one that has two parallel lines drawn across it, followed by the word “cancelled” written between them. It is also known as a crossed cheque or a payee account cheque. A cancelled cheque cannot be used to withdraw or transfer money, but it can be used to verify your bank account details, such as your name, account number, IFSC code, and MICR code. A cancelled cheque acts as proof of your banking identity and prevents any misuse of your cheque.
How to Write a Cancelled Cheque?
Writing a cancelled cheque is very simple and does not require any special skills. You just need to follow these steps:
• Take a fresh cheque from your chequebook that you want to cancel. Do not sign or fill in any other details on the cheque.
• Draw two parallel lines across the cheque, preferably in the upper left corner. Make sure the lines do not cover any important information on the cheque.
• Write the word “CANCELLED” in capital letters between the two lines. You can also write it in the lower right corner or anywhere else on the cheque, as long as it is clearly visible.
• Your cancelled cheque is ready. You can submit it for the purpose you need it for.
While cancelled checks are ineffective for fund withdrawals, they pose a risk of cyber theft or misuse due to the inclusion of sensitive information such as the MICR code, bank account number, IFSC (International Financial Services Code), account holder’s name, bank name with the branch, and cheque number.
When to Use a Cancelled Cheque?
A cancelled cheque can be used for various purposes, such as:
- Opening a bank account, a demat account, or a trading account. A cancelled cheque is required as proof of your bank account and your KYC verification.
- Investing in mutual funds, stocks, or other financial instruments. A cancelled cheque is required to link your bank account with your investment account and enable electronic transactions.
- Applying for a loan, an insurance policy, or a credit card. A cancelled cheque is required to verify your bank account and enable EMI payments or premium deductions.
- Withdrawing money from your EPF account, your pension account, or your gratuity account. A cancelled cheque is required to transfer the money to your bank account.
- Setting up an Electronic Clearance Service (ECS) or an auto-debit facility. A cancelled cheque is required to authorise the bank to deduct a fixed amount from your account every month for paying bills, fees, subscriptions, etc.
Cancelled Cheque Example
Here is an example of what a cancelled cheque looks like:
How to Give a Cancelled Cheque?
Giving a cancelled cheque is very easy and safe. You just need to follow these tips:
• Always use a fresh cheque to cancel it. Do not use a cheque that has already been used or cancelled before.
• Do not sign or fill any other details on the cheque, except the word “cancelled” and the two parallel lines.
• Make sure the word “cancelled” and the two parallel lines are clearly visible and do not cover any important information on the cheque.
• Do not give a cancelled cheque to anyone you do not trust or for any purpose you are not sure about. Always ask for a receipt or an acknowledgement when you give a cancelled cheque.
• Keep a record of the cheque number, the date, and the purpose of giving a cancelled cheque. This will help you in case of any dispute or fraud.
Risks Associated with Cancelled Cheque
Some of the risks associated with cancelled cheques are:
• Someone might try to forge your signature and create a fake cheque using your cheque details. This could lead to loss of money from your account or legal troubles.
• Someone might use your cheque details to access your online banking account or other financial services. This could lead to identity theft, phishing, or hacking.
• Someone might use your cheque details to impersonate you and apply for loans, credit cards, or other products in your name. This could affect your credit score, reputation, or liability.
Conclusion
Understanding the significance of a cancelled cheque and how to write it correctly is crucial for various financial transactions. Whether it’s completing KYC requirements, facilitating EPF withdrawals, enabling electronic clearance services, determining EMIs for loans, or opening a Demat account, a cancelled cheque plays a pivotal role. However, you should be careful and remember your cancelled cheques.
FAQs
No, your bank is not authorised to cancel your cheque on your behalf. You are responsible for initiating the cancellation process. If you don’t have a cheque, your bank will issue one to you, enabling you to proceed with the cancellation as needed.
If you have already issued a cheque to someone and want to cancel it, you need to contact your bank and request them to stop the payment of the cheque. You may have to provide the cheque number, date, amount, and payee name to the bank. Alternatively, you can ask the payee to return the cheque to you and destroy it.
No, a cancelled cheque does not require a signature. A cancelled cheque is a cheque that has two parallel lines drawn across it and the word “cancelled” written between them. It is used as proof of having a bank account and not for withdrawing money. Therefore, there is no need to sign a cancelled cheque.
To cancel a cheque, you need a fresh cheque from your chequebook that you want to cancel. You must draw two parallel lines across the cheque and write the word “cancelled” between them. You do not need to sign or fill in any other details on the cheque. You can then submit the cancelled cheque for the purpose you need it for.
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Disclaimer: Investments in the securities market are subject to market risks; read all the related documents carefully before investing.