Uses of cancelled cheque
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Uses and Misuses of Cancelled Cheque

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You must have heard about a cancelled cheque while availing loans or buying anything on EMIs. But if you don’t know anything about it, then this article should help you be familiar with all. Read on!

What is a cancelled cheque?

A cheque is known as a ‘cancelled cheque’ when you cancel it by drawing two lines across it and writing the word ‘cancelled’ on it. The cancelled cheque is proof that you are the owner of the account with the bank. Other than writing cancelled on it, nothing else needs to be written on it and not even signed. You can’t use the cheque to withdraw an amount as it carries no monetary value. The cancelled cheque is majorly used to know that you own that account as it contains your name, account number, IFSC code, MICR code, cheque number and branch address.

What are the uses of a cancelled cheque?

  • New bank account opening – If you want to open a new bank account, then you may be required to submit a cancelled cheque for a saving or current account.
  • ECS service – Electronic Clearing Service (ECS) is an electronic mode of transfer. It is used for paperless and automated credit or debit transaction from one bank to another. And to be able doing that, the submission of a cancelled cheque will be needed.
  • Demat account – You will also need to submit a cancelled cheque at the time of opening a Demat account. Along with it, you will also be submitting account opening form, address and ID proof, along with other KYC documents.
  • EPF withdrawal – If you wish to withdraw the amount from your PF account, then the EPFO will need to verify your bank details. And to do that, they will need a cancelled cheque to know that the account to which they need to transfer the money belongs only to you.
  • EMI facility – If you want to apply for a personal loan, home loan, car loan and more, you will then need to pay it via EMIs. To facilitate this, you will be required to submit a cancelled cheque as KYC.
  • Insurance policy – You will also need to submit a cancelled cheque at the time of buying an insurance policy. It will be needed as a KYC document to process your application faster.

 

What are the misuses of a cancelled cheque?  

Other than using a cancelled cheque for many uses, it may also be misused in many ways. Have a look:

  • A cancelled cheque comes with no monetary value. To avoid your cheque from being misused, you must write the word ‘cancelled’ across it.
  • Banks have no provision of accepting the already cancelled cheque. They do not accept alteration on a cheque to avoid legal complications in future.
  • A cheque, if it is once cancelled, is always considered as cancelled forever.
  • There have been instances of misuse or fraud via using a cancelled cheque. Hence, you should be careful while writing a cancelled cheque. You should always ensure that you are giving even a cancelled cheque only to the legitimate person.

How to write a cancelled cheque?

  1. Draw two parallel lines across the cheque
  2. Write the word ‘cancelled’ between those two lines
  3. That’s it – your cancelled cheque is ready, and it can’t be used for transaction purposes

You just went through the concept of a cancelled cheque, along with its uses and misuses. Now, you will be in a better position to control how a cancelled cheque is being presented to another for multiple purposes.

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