The term "canceled" is written across two lines of a canceled cheque. It proves that the individual has a checking account and that the cheque cannot be cashed. Only that you have a bank account is demonstrated by it. In addition, a canceled check still has information on it, like the account holder's name, branch name and location, account number, MICR code, and IFSC code, even though it cannot be used to withdraw money from the drawer's account.
The cheque does not need to be written or signed in addition to that. In order to stop the cheque from being used in an unlawful way, you are being asked to cancel it.
How to write a canceled cheque ?
You need to exercise caution when cancelling a cheque because it could be used fraudulently. Observe these steps to write a cancelled cheque:
Step1: take a fresh cheque from the cheque leaf you wish to cancel. Make no signatures anywhere on the cheque.
Step2: Draw two cross lines over the tick in parallel.
Step3: Write "CANCELLED" between the two lines in capital letters.
It's crucial to keep in mind that the parallel lines you drew across the check exclude vital details such as the account number, account holder's name, IFSC code, MIRC code, name, and branch address of the bank where the account is located.
You can still cancel a cheque if you've already written one by returning to Step 2 if you made a mistake.
Despite the fact that a cancelled cheque cannot be used to withdraw money, scammers may be able to take advantage of the situation. So it's imperative to never sign a cancelled cheque while handing it to someone. Verify who is in charge of collecting it before handing it over to them to be on the safe side.
When would you need a cancelled cheque
The following scenarios may require you to submit a voided cheque:
Mutual Funds
Opening a Demat account is required if you plan to invest in mutual funds or stocks. When you open an account, the company will ask for a copy of a cancelled cheque to confirm that the bank account linked to the investment is actually yours. According to the Know Your Customer (KYC) regulations, the requirement of the cancelled cheque is made.
EMI
When purchasing a gadget or other expensive goods, Equated Monthly Instalments (EMI) is the preferred way of payment. Even with debts such as personal, house, student, and auto loans, people still make monthly payments. You must provide a voided cheque as evidence that you have a bank account before the monthly instalment process may begin.
Electronic Clearance Service
This type of service automatically withdraws money from your account each month for any transactions you have completed. In this scenario, you must configure the electronic clearing service.
Withdrawals from Provident Funds
When you request an EPF withdrawal, businesses frequently want a cancelled cheque.
Insurance Policy
Even when acquiring insurance coverage, you must present a voided cheque.
Conclusion
The key tool in banking is a cancelled cheque. Many financial responsibilities require it to be effective. The word "cancelled" is printed across the cheque, which is what it is. The check is still valid and can still be used despite this. It is merely evidence of your banking information and is not intended for payments. The cancelled cheque still has the bank's name, your account number and the cheque number on it.
