Cancelled Cheque: Everything You Need To Know

Although more people are banking online, you may sometimes need a cancelled cheque. This is a physical document with your bank account information on it. It can verify your information or prove that you have a valid bank account. Cancelled cheques are often required when opening a new bank account or applying for a loan. Banks can crosscheck your account information when you provide a cancelled check.

Even if you’re looking to buy something on a monthly payment or EMI, you will need this type of cheque. Read on if you’re wondering how to write this cheque or its purpose. We’ll tell you everything about cancelled cheques.

What is a cancelled cheque?

A cancelled cheque is a regular cheque with the words like ‘cancelled’ or ‘void’ written across it. The cheque may have your account number, branch number, and your bank’s name. It also has a watermark and unique security features to prevent it from being copied or altered. This way, you don’t need to worry when sending your cheque to an institution or individual.

When do you need to cancel a cheque?

You have to submit a cancelled cheque when opening a new bank account. Also, it is required when applying for a loan or setting up EMI payments. A cancelled cheque makes it easy for the recipient to verify your identity. It ensures that the account is active. Here are some cases where you’ll need to submit a cancelled cheque:

KYC Documentation

You have to submit a cancelled cheque when updating your KYC details. This is to ensure that the bank has your latest account information. When investing in mutual funds, you may be asked to submit an image of a cancelled cheque beforehand.

Direct Deposit

You must submit it to set up a direct deposit for your paycheck or any recurring payment. The employer or the organisation making the deposit can verify your account information and pay the amount safely and securely.

Your employer will record your bank account information on file once the direct deposit is set up. As a result, you’d only need to provide more details if you moved banks or established a new account.

Automatic Bill Payments

Besides, bill payments or monthly expenses are also processed through a cancelled cheque. You will need to provide your bank with a cancellation cheque for these expenses. They may ask for a cancelled cheque to verify your account information.

Opening a Demat Account

When opening a Demat account, you need to reach out to a stockbroker. Your stockbroker will need your bank account details and a cancelled cheque. This is to verify your identity and ensure the account is active. These details will make your transactions easy and comfortable.

Payroll Deductions

Suppose you have any deductions from your paycheques, such as for health insurance or a retirement savings plan. In that case, you will need to provide your bank account information to the organisation making the deduction. They will likely ask for a cancelled cheque so that they can verify your account information. 

When you give someone a cancelled cheque, they can use it to do a transaction for you. So make sure you trust the person or organisation before giving them a cancelled cheque.

How to write a cancelled cheque?

Writing a cancelled cheque is straightforward. It is similar to writing a regular cheque, with a few extra steps. Follow these instructions:

Step 1

Take a fresh cheque 

Step 2

Do not add any personal details like your name or signature to this cheque.

Step 3

Draw two parallel lines where you can write “Cancelled” using block letters. Draw these lines diagonally across the cheque.

Be careful while writing a cheque. Don’t draw the lines or write over the MICR code, branch address, account holder’s name, account number, etc.

If you’re sending the cancelled cheque by mail, you should use registered mail. This way, you’ll have proof that it was delivered. You may also want to keep a copy of the cheque for your records.

FAQs:

If you need to know more, here are some common questions people ask about cancelled cheques: 

Can I provide a photocopy of a cancelled cheque?

In some cases, a photocopy may be accepted. However, it’s always best to check with the payee to see if they require the original cheque or if a photocopy will work.

Do I need to sign before cancelling a cheque?

It is advisable not to sign a cheque you’re about to cancel. It may give the person in possession of the cheque the ability to alter the payee’s name and the amount and cash it.

Can I withdraw money using a cancelled cheque?

No, a cancelled check cannot be used to withdraw money from your bank.

What information on a cancelled cheque can be used by the receiver?

The account number and the bank’s details are the only information extracted from a cancelled cheque. The account holder’s name, the date, and the amount of the cheque cannot be determined from a cancelled cheque.

What should I do with old cancelled cheques?

You can shred them or keep them in a safe place. If you need to provide a cancelled cheque at some point, you can always make a new one.

Conclusion

A cancelled cheque is a sign of authorisation that can be used to set up transactions on your behalf. Only provide this cheque to people or organisations you trust. When in doubt, ask the payee if they will accept a photocopy of the cheque instead. Lastly, ensure you understand how to write and cancel a cheque before doing so.

At Piramal Finance, we are here to guide you through the process. Contact our representatives if you need help writing or sending a cancelled cheque to get a loan. For other facts about personal loans, credit cards and financial management, check out more blogs on our website!