What is a Cancelled Cheque?
A Cancelled Cheque is a cheque from which payment has already been made. The moment the cash is drawn with a cheque, the bank marks it as cancelled. Once it is cancelled, the cheque cannot be used as an authorisation to remove additional funds from the payer’s account. A cancelled cheque refers to a cheque that contains two parallel lines drawn across the layout. It is also necessary to write the term ‘cancelled’ between these lines. The person should not make a signature on the cancelled cheque. The cancelled cheque will be used to gather details such as account number, account holder’s name, MICR code, name and branch name of the bank, and IFSC.
When do we need a Cancelled Cheque?
A person would need a cancelled cheque in the following situations:-
- Mutual Funds: You must open a Demat account if you are investing in mutual funds or the stock market. The company would want you to submit a cancelled cheque to open the report to verify if the bank account associated with the investment is yours in reality. The cancelled cheque requires following the Know Your Customer (KYC) guidelines.
- EMI: Equated Monthly Instalments (EMI) is the most sought-after payment method when you are buying a gadget or a high-value item. Individuals pay monthly instalments even in car loans, home loans, education loans, and personal loans. 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 an electronic clearance service.
- Provident Fund Withdrawal: Companies generally ask for a cancelled cheque when you want to withdraw your EPF money.
FAQ’S
✅ Is a Cancelled cheque safe?
Even though a cancelled cheque does not have any financial value, there have been reports of its misuse; therefore, before handing over a cancelled cheque, you should enquire if a photocopy or scanned copy of the cheque or the first page of the passbook is acceptable.
✅ What happens if the Cancelled cheque is signed?
Usually, when issuing a cancelled cheque, you don’t have to sign the cheque, but some banks might ask you to publish a cancelled cheque with your signature on it. It works as proof that you hold a bank account with the bank where you claim to have an account.
✅ Does the Cancelled cheque require a date?
Do not sign the cheque or mention the date or write anything else on the cheque leaf.
