Step By Step Process To Write a Cancelled Cheque

Introducing Cheques 

A cheque is a document used for monetary transactions. It is an order for the bank to transfer a specific amount from one account to another. Then, the bank transfers money from the drawer of the cheque to the payee. So, there are three parties involved in a transaction using a cheque:

Drawer of the cheque

This person writes the cheque, signs it, and orders the bank to transfer a specific amount.

Drawee of the cheque

The bank is the drawee of the cheque. Therefore, the bank is required to pay the specific amount that is written on the cheque.

Payee

This is the person to whom the bank is required to transfer the amount on the cheque.

There are many different types of cheques used in financial sectors. But in this article, let’s focus on how to cancel a cheque. This article will also help you learn how to write a cancelled cheque and its uses.

What is a Cancelled Cheque?

When a cheque is crossed with two parallel lines running across, it is called a cancelled cheque. The word “cancelled” is written between the two lines in bold letters. This is done to make sure that the cheque cannot be misused.

Even though you cannot use a cancelled cheque to withdraw or transfer money, it is still an important document. A cheque has your name, account number, and other essential details. This information helps prove that you hold a bank account.

Read on further to learn how to cancel a cheque and learn about the uses of cancelled cheques.

How to Cancel a Cheque? 

It is essential that you learn how to cancel a cheque properly. A cheque has valuable information such as your name, account number, and IFSC code. So, if a cheque is cancelled correctly, it can still be used.

Fortunately, cancelling a cheque is a straightforward process. First, however, you need to follow these next few steps:

Step 1

Take a new cheque from your chequebook. Make sure that you refrain from signing anywhere on the cheque.

Step 2

Draw two parallel lines running across the cheque. Make sure that the lines you draw are clear of all critical information on the cheque.

Essential details such as the account holder’s name, the account number, the IFSC code, and the bank’s name and branch address should be visible.

Step 3

Write the word “CANCELLED” between the two lines. Write it boldly and in capital letters. Use waterproof ink in a dark colour to write this.

If you are writing a cheque and you make an error, don’t worry. You can easily cancel that cheque and write a new one. Just continue from step 2 mentioned above.

If you have followed these steps, you have a cancelled cheque in your hands. But, you may wonder, if this cheque can’t withdraw money, what else is it used for? You will be surprised: there are several uses for cancelled cheques.

Please continue reading to learn more about them.

Uses of Cancelled Cheques 

A cancelled cheque is an important document required for several financial procedures. These are:

Opening a Demat account

If you want to trade shares in the stock market, you need a Demat account. To open this account, you must submit a cancelled cheque and other identity proof documents.

Employee Provident Fund (EPF) withdrawal

You must submit a cancelled cheque and other documents to withdraw money from your EPF account.

Insurance purposes 

Keep a cancelled cheque ready if you want to buy an insurance policy. Many organisations ask for this as proof of identity.

Opening a bank account 

A cancelled cheque is a necessary document required for opening a bank account.

Equated monthly installments (EMI)

You can pay in monthly installments if you opt for a car, home, or any other type of loan. However, if you prefer EMI options, you need a cancelled cheque to complete all the formalities.

Know your Consumer (KYC)

Investing in stocks and mutual funds will require you to get a KYC. You will need to submit a cancelled cheque to complete this procedure.

Take These Precautions While Using Cheques

While handing over a cancelled cheque, make sure you don’t sign it. No procedure needs you to sign your cancelled cheque. Also, do not write any other information on the cheque. This step will help prevent any fraudulent activities in your account.

Make sure that you are handing over your cheque to the right person. In addition, verify the credentials of any bank employee you talk to. Being vigilant and following these precautions will help you stay safe.

Finally, immediately alert the bank if you think an unauthorised transaction has been made from your bank account. By doing this, the bank can trace the transaction and take further necessary action.

On A Concluding Note

A cheque is an important financial document. It is still widely used in an ever-evolving digital world. So, you must have enough knowledge about how to use cheques.

An improper cheque can be misused to carry out fraudulent transactions. Knowing what you should and shouldn’t do with cheques will secure your account and prevent fraud.

Suppose you have doubts about cheques or need help managing your finances. In that case, you can always consult the experts at Piramal Finance. Feel free to visit the Piramal Finance website to explore more about their products and services.