In today’s digital age, financial transactions are increasingly paperless. However, there are still instances where you may be asked for a cancelled cheque. But what exactly is a cancelled cheque, and how do you write a cancelled cheque? In this blog, we’ll explore the importance of a cancelled cheque, why it’s required, and the steps to create and provide one.
What Is a Cancelled Cheque?
A cancelled cheque is a physical paper cheque that has been rendered invalid by making it unusable for any financial transaction. It serves as a crucial document for various purposes, such as setting up Electronic Clearing Service (ECS) mandates, linking your bank account to various financial instruments, or verifying your bank account details. The primary reason for using a cancelled cheque is to provide proof of your bank account’s existence and authenticity.
How to Write a Cancelled Cheque?
Writing a cancelled cheque is a straightforward process. Here are the steps to create one:
- You will need a blank cheque from your checkbook, a pen, and a ruler.
- To cancel the cheque, draw two parallel lines across the cheque, preferably using a ruler. This action indicates that the cheque is no longer valid.
- Write “Cancelled” in large, bold letters across the cheque. This further signifies that the cheque is not to be used for any transaction.
- Sign the cheque, just as you would for any regular cheque if required. However in most cases, signing a cancelled cheque is not required.
- In some cases, you might be asked to provide additional information on the cheque, such as your name or account number. Ensure that this information is clear and legible.
Also read: NRI Accounts: Which one to choose? NRE or NRO?
How to Give a Cancelled Cheque?
Now that you have created your cancelled cheque, the next question is how to provide a cancelled cheque when needed. Here are some common ways to share a cancelled cheque:
- In-Person: You can hand over the physical cancelled cheque when required. Ensure that it is handled securely.
- Scanned Copy: You can scan the cancelled cheque and send it electronically. Make sure the scanned copy is clear and legible.
- Online Banking: Some banks allow you to generate a digital copy of a cancelled cheque through their online banking portals. This can be convenient when providing proof of your account electronically.
Why Is a Cancelled Cheque Required?
A cancelled cheque is often required for various financial transactions to confirm your bank account details. It helps in setting up automatic payments, salary deposits, or any scenario where someone needs to ensure they are transferring funds to the correct account. The cancelled cheque also provides proof of ownership and authenticity of your bank account.
How Does a Cancelled Cheque Look Like?
A lot of users have queries on cancelled cheque samples, cancelled cheque format, and more. A cancelled cheque typically appears like any regular cheque, with the added marks of two parallel lines, “Cancelled” written across it, and your signature. This below-attached image helps provide insight into how a cancelled cheque looks.
What is the use of Cancelled Cheque?
A cancelled cheque serves multiple purposes in financial transactions. Its primary use is to provide proof of your bank account’s existence and authenticity. A cancelled cheque is used to set up electronic payment mandates, verify bank account information for financial products, salary deposits, and facilitate automatic bill payments. Essentially, it acts as a reliable means of confirming your bank account details, preventing errors in financial transactions, and ensuring that funds are directed accurately. Here’s a brief of areas where cancelled cheques are required:
- Electronic Clearing Service (ECS) Mandates: A cancelled cheque is often required to set up ECS mandates for various payments, including utility bills, loan EMIs, and insurance premiums.
- Bank Account Verification: Financial institutions use cancelled cheques to verify the authenticity of your bank account when linking it to financial products such as mutual funds, trading accounts, or credit cards.
- Salary Deposits: Employers may request a cancelled cheque to ensure they deposit your salary directly into your bank account.
- Automatic Bill Payments: Many companies, like telecom providers and utility companies, use cancelled cheques to establish automatic bill payment arrangements.
- Loan Applications: Lenders may ask for a cancelled cheque as part of the documentation when applying for loans to confirm your bank account details.
- Setting Up Standing Instructions: When you want to establish standing instructions for regular payments, such as rent or investments, a cancelled cheque can be used as proof of your account details.
- Linking to Demat Accounts: For investing in the stock market, you may need to link your bank account to your Demat account, and a cancelled cheque is used for verification.
- Insurance Premium Payments: Insurance companies often require cancelled cheques for premium payments made through Electronic Clearing Service (ECS).
- Receiving Government Subsidies: Some government programs and subsidies are directly deposited into your bank account, and a cancelled cheque can help ensure the funds are directed correctly.
Also read: 11 Best NRE Accounts in India for NRIs 2023: Online Application
What is the Difference Between a Stop Payment and a Cancelled Cheque?
| STOP Payment | CANCELLED Cheque |
| Any cheque issued for STOP Payment is transactional in nature. | Cancelled cheque are worthless when it comes to transaction nature as it cannot be used as a method of payment. |
| Stop Payment does not have the written word “CANCELLED.” on it. | Cancelled cheque has the word “CANCELLED” written on it. |
| Stop payment is a request made by an account holder to their bank to prevent a specific check or payment from being processed or honored. | A cancelled cheque is a regular paper check from your checkbook that you render invalid for any financial transaction. |
| Banks may levy a small fee as charges while issuing Stop Payment. | Banks do not charge any fee during “Cancelled Cheque”. |
Wrapping Up
A cancelled cheque plays a vital role in various financial processes. It provides a simple yet effective way to verify your bank account details, ensuring that transactions are processed accurately. Knowing how to write, provide, and use a cancelled cheque can prove to be a valuable skill in managing your financial affairs.
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FAQs
Should I sign the cancelled cheque?
- No, you do not need to sign a cancelled cheque as it is merely a piece of evidence and not transactional in nature. When it comes to a cancelled cheque, there is no necessity to include any form of writing, be it your signature, the amount, the recipient’s name, or any other details.
Can my bank cancel my cheque?
- No, your bank cannot cancel your cheque on your behalf. It is therefore your responsibility to cancel the cheque and provide it when required.
What is cancelled cheque leaf?
- A cancelled cheque leaf is a single piece of cheque taken out of the chequebook that has been rendered invalid by making it unusable for any financial transaction.
Can I use cancelled cheque to withdraw money?
- No, you cannot use the cancelled cheque to withdraw money as it is rendered invalid by marking it as cancelled.
Is there any risk in sharing cancelled cheque?
- As the cancel cheque is not transactional in nature and cannot be used to conduct any transactions, be it, withdrawal, deposits or more. As such users can be rest assured safe sharing cancelled cheque. However, canceled cheque do contain other important details of the account holder like accountholder name, bank account, MICR Code, IFSC Code and more. It is advised to share cancelled cheque only with trusted parties.
Why is cancelled cheque needed?
- A cancelled cheque serves multiple purposes in financial transactions. Its primary use is to provide proof of your bank account’s existence and authenticity. A cancelled cheque is used to set up electronic payment mandates, verify bank account information for financial products, salary deposits, and facilitate automatic bill payments
How to fill cancelled cheque?
- Writing a cancelled cheque is a straightforward process. Here are the steps to create one:
- You will need a blank cheque from your checkbook, a pen, and a ruler.
- To cancel the cheque, draw two parallel lines across the cheque, preferably using a ruler. This action indicates that the cheque is no longer valid.
- Write “Cancelled” in large, bold letters across the cheque. This further signifies that the cheque is not to be used for any transaction.
What color ink should I use to write cancelled cheque?
- You should use black or blue ink pen to write a cancelled cheque. Using any other color ink may not be advisable by the banking institution or NBFCs.
