Cancel a cheque 2023: This article is designed to enlighten you about the significance of a cancelled cheque in various financial transactions, when it’s needed, and to whom it should be furnished. Cancel a cheque is a crucial piece of evidence. It’s important to ensure that you provide it only to authorized individuals and avoid handing it over to unknown parties.
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- 1 What Is Cheque?
- 1.1 Key Elements of a Cheque
- 1.2 What Does a Cancelled Cheque Mean?
- 1.3 How to cancel a cheque?
- 1.4 When Is a Cancelled Cheque Necessary?
- 1.5 How to Properly Fill Out a Cancelled Cheque
- 1.6 Sample of a Cancelled Cheque
- 1.7 Cancel Cheque Image
- 1.8 Differences Between Stop Payment and Canceled Cheque
- 1.9 Cancel a cheque (FAQ)
What Is Cheque?
A Cheque is a time-honored and extensively used payment method in India. It’s a negotiable document that directs the bank to transfer a specified amount from the account of the person who writes it to the payee or the holder of the cheque. Even though digital transactions are now prevalent due to technological advancements, cheques remain in use, particularly among individuals who are skeptical of online methods or find them less convenient.
Key Elements of a Cheque
- Drawer of the Cheque: The person who signs the cheque or instructs the bank to pay a specific sum of money through the cheque.
- Drawee of the Cheque: The bank, which is directed to pay the specified amount stated on the cheque.
- Payee: The individual to whom the bank is obligated to make the payment.
- Various types of cheques exist, such as open cheques, self-cheques, bank cheques, crossed cheques, stale cheques, and cancelled cheques.
What Does a Cancelled Cheque Mean?
The concept behind a cancelled cheque is as simple as the term itself – it’s a cheque that has been invalidated or marked as canceled. This simple act has significant utility.
A cheque becomes “cancelled” when two lines are drawn across it, and the word “cancelled” is written between these lines. Such a cheque, with these distinct characteristics, cannot be used to transfer any funds. However, it serves a vital role as a Know Your Customer (KYC) document.
Moreover, a cancelled cheque serves as proof that an individual possesses a bank account. It includes essential details such as the account holder’s name, account number, IFSC Code, MICR code, and the name and location of the bank branch where the account is held.
How to cancel a cheque?
To cancel a cheque, simply draw two lines across it and write the word “Cancelled” between them. No signature is required, as it is a cancelled cheque. Its purpose is solely to serve as proof of having a bank account. The presence of the account holder’s name, branch name, address, account number, and MICR code on the cheque is adequate as supporting evidence.
When Is a Cancelled Cheque Necessary?
t is required for the following financial transactions:
- KYC Completion: KYC, or Know Your Customer, is a process where financial institutions request various documents to properly verify an individual engaging in financial activities. A cancelled cheque is necessary for various market-linked investments like stocks, mutual funds, and more. It establishes your status as a bank account holder and provides your banking credentials, verifying your bank account, account holder’s name, account number, and bank details.
- Electronic Clearance Services: Electronic Clearance Service (ECS) allows paperless financial transfers between accounts. Service providers or investment firms may debit a set amount from your bank account regularly, like monthly utility bills. To set up ECS, a cancelled cheque is often requested, enabling automatic withdrawals based on the provided information.
- EMI: Equated Monthly Installments (EMI) are common for various loans, including home loans, car loans, and education loans. Lenders may require a cancelled cheque to complete the legalities associated with these monthly payment options.
- Demat Account: A Demat account holds shares in electronic format. When opening a Demat account, a cancelled cheque, along with other supporting documents, is needed. This information is used to enable auto-debit and auto-credit between your savings account and Demat account for electronic fund transfers.
- EMPLOYEE PROVIDENT FUND Withdrawal: If your EPF account has matured or you wish to make an early withdrawal, you’ll need to provide a properly completed form and a cancelled cheque. The EPFO (Employees Provident Fund Organization) uses the cheque’s information to credit the funds directly to your bank account.
- Bank Account Opening: To complete the process of opening a bank account, a cancelled cheque is often required, whether for a savings account or a current account.
- Insurance Policy: When purchasing insurance policies, such as moneyback, endowments, or health insurance, you may be asked to provide a cancelled cheque. This allows insurance premiums to be deducted directly from your savings account.
- Loan Disbursement: Lending businesses typically transfer loan funds directly to your bank account, and they may request a cancelled cheque to facilitate this process.
These are just a few examples of when a cancelled cheque is needed. It serves as a vital document for various financial transactions.
How to Properly Fill Out a Cancelled Cheque
Now that you know what a cancelled cheque is, here’s a simple guide to help you create one for your applications. Follow these easy steps:
- Step 1: Begin with a fresh cheque from your chequebook. Do not sign anywhere on the cheque.
- Step 2: Using a blue or black pen, draw two parallel lines across the cheque. These lines should connect both ends, leaving enough space in between for writing.
- Step 3: Write “CANCELLED” between the two lines. You can use uppercase or lowercase letters.
- Step 4: Do not sign a cancelled cheque. If a bank or any other organization requests your signature, seek clarification from a senior bank representative. If you’re unsure, consider asking for written confirmation from the requesting party.
Please Note: Ensure that the parallel lines you draw across the cheque do not cover critical information such as the account number, account holder’s name, IFSC or MICR code, and the bank’s branch location.
When handling a cancelled cheque, there are various fraudulent activities that may put your financial security at risk. This is due to the sensitive information contained on the cheque, including:
- Account number
- Name of the account holder
- IFSC Code
- MICR Code
- Bank’s name
- The name of the bank branch
This information can be exploited by fraudsters for various illegal activities. If you sign a cancelled cheque, it could be duplicated by a fraudster and used for unauthorized purposes. This is why it’s important to exercise caution when someone requests your signature on a cancelled cheque. If you’re uncertain or concerned, it’s advisable to verify the necessity of your signature with your bank or request written confirmation from the requesting party to protect your financial interests.
Sample of a Cancelled Cheque
A cancelled cheque is similar to a regular cheque and includes the following components:
- Name of the bank
- Name of the branch
- Name of the account holder
- Account number
- IFSC code
- MICR code
Cancel Cheque Image
If you examine the canceled cheque image, you’ll notice the distinction. Furthermore, the word ‘canceled’ will be printed across the check between two parallel lines. Below is a sample format of a canceled cheque.
Differences Between Stop Payment and Canceled Cheque
🚫 STOP Payment | 📛 CANCELLED Cheque |
---|---|
In the case of STOP Payment, the cheque will be transactional. | In this case, the cheque is worthless as a means of payment. |
The word “CANCELLED” is not written. | The word “CANCELLED” is written. |
It is utilized in insufficient funds in an account against a cheque to make a payment or when a cheque is misplaced, or when you want to halt a payment intentionally. | It is used to provide information such as the account holder’s name, account number, the bank’s name, IFSC code, MICR code, and the bank branch’s name. |
You must expressly instruct a bank to halt payment on a cheque by issuing a ‘stop payment’ order. | In this case, no such order is necessary since a canceled cheque lacks transactional authority and will never be utilized by the bank to make a payment. |
A bank may charge a modest fee for canceling a cheque payment. | Bank charges nothing. |
In conclusion, a canceled cheque is a method to ensure that unauthorized access to your account is prevented. It contains essential information like the account number, the account holder’s name, the IFSC code, the MICR code, and the bank’s name. It is advisable to refrain from signing a canceled cheque to avoid potential exploitation by scammers.
Cancel a cheque (FAQ)
To void a cheque, simply draw two lines across it and write “CANCELLED” between these lines.
Cancelled cheques are essential in various scenarios, including fulfilling requirements for processes like KYC, EMI payments, ECS transactions, bank account openings, selecting insurance policies, establishing a Demat account, making PF withdrawals, and more.
It is advisable to always use blue or black ink when writing or voiding a cheque. Any other color may be considered unacceptable.
A cancelled cheque typically contains details such as your bank account number, branch name and location, and the MICR code.
No, a cancelled cheque cannot be used to withdraw money from the account, making it a safe option for various purposes.
It is not necessary to sign a cancelled cheque, and it is often recommended not to do so to prevent potential misuse. No process typically requires a signed cancelled cheque.