Cancelled Cheque: How to Write and Use Effectively

Cheques are one of India's most widely used banking services. They are easy to understand, so they can be used by people living in urban as well as rural areas. Cheques also have multiple uses, acting as proof of ownership in addition to a means of transaction. Additionally, a cancelled cheque, a type of cheque, can be used to open a bank account and apply for a loan.

What is a cancelled cheque?

A cheque with two parallel strike lines is known as a cancelled cheque. The phrase "CANCELLED" is scrawled across the cheque between the two parallel strike lines. It is written like this to ensure no one can misuse the cheque. Although cancelled cheques cannot be used to withdraw funds, they are vulnerable to cyber theft or misuse because they contain the following information:

• MICR code
• Bank account number
• IFSC (International Financial Services Code)
• Account holder's name
• Bank name with the branch
• Cheque number

What does a cancelled cheque denote?
 

A cancelled cheque cannot be used for withdrawing or sending money. It contains your banking information which some banks and other organisations may use to verify your details and their correctness. The cancelled cheque contains your bank account number, the IFSC code of your home branch, and the MICR code which are used by lenders, investment brokers, and other organisations as proof of your banking details. So, it’s not wrong to say that a cancelled also acts your banking bonafide certificate.

A cancelled cheque is also used for KYC verification, insurance claims, EPF withdrawals, and loan disbursals. Hence, it forms a crucial document for availing of several financial services and more. However, always ensure to use correct measures for cancelling a cheque since they can be used for fraudulent purposes if not cancelled as per the convention. 

How to write a cancelled cheque?

It is easy to write a cancelled cheque. It does not require extensive information, so anyone with a pen can write one. Keep these pointers in mind if you want to write a cancelled cheque:

• Take a new cheque.
• Do not write any information on the cheque, such as the Payee's name, the amount, or signature.
• Across the check, draw two parallel lines.
• Between the two parallel lines, write "CANCELLED" in capital letters.
• Ensure that the parallel lines do not obscure any vital information, like the account number, IFSC code, MICR code, account holder's name, bank's name, or location.

When do you need a cancelled cheque?

A cancelled cheque is more valuable than you might think. Here are some of its most common uses:

• You must present a cancelled check when investing in stocks, mutual funds, or other financial assets. You cannot start investing without one.
• If you want to make a withdrawal from your EPF account, you will need to provide a cancelled cheque.
• ECS stands for Electronic Clearance Service. It allows you to move money from one account to another. You will need to send a cancelled cheque to your bank to activate this service on your account.
• Before settling your EMI payments against an obtained loan or credit amount, your bank or NBFC will need a cancelled cheque.
• If you wish to open a Demat account, you must submit a cancelled cheque along with additional KYC papers such as proof of identification, proof of address, and so on.
• When purchasing insurance, you must present a cancelled cheque as verification.
  

Risk Associated with a cancelled cheque
 

People worry about misuse and fraudulent withdrawal using the cancelled cheque. However, no such transaction can occur since they are legally cancelled, and you must not worry about it. However, ensure to cancel your cheque as per the norms.

• Always use a blue or black ink pen to cancel your cheque as banks may reject your cheque in other cases.
• No signature is required on the cancelled cheque. It is only used to verify your banking details and similar purposes. So, you don’t need to put any signature.
• Make sure to write ‘Cancelled’ after marking parallel lines on the cheque. In the moment of hassles, one may forget to mark the word. Banks won’t treat it as cancelled cheque and may reject it. 

Nobody can withdraw money using a cancelled cheque, but people can still use it for fraudulent acts. To be safe, do not sign a cancelled cheque and always hand it over to an authoritative figure. A cancelled cheque still has information like your bank account number, MICR code, IFSC code, bank name, account holder's name, and so on.

Always ensure your signature is not affixed to a cancelled cheque; otherwise, fraudsters may be able to duplicate it. If a signature on the cheque leaf is mandated, get a statement or affirmation to support the same.

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Metra Trust or its affiliates to any licensing or registration requirements. Metra Trust shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.