What is a Cancelled Cheque & How to Write It?

Q: Q. Is it safe to present a canceled cheque?

A canceled cheque rarely carries any risk. A canceled cheque leaf is only an issue when it falls into the wrong hands and creates the possibility of a fraudulent transaction. Use waterproof ink, do not sign the cheque and only give it to trustworthy parties when canceling a cheque to prevent misuse.

Q: Q. How is a cheque canceled?

A blank cheque can be used to write a canceled cheque by creating two parallel lines that are diagonally written across the cheque leaf. To designate it as canceled, place the word "CANCELLED" between the lines' spaces. You have successfully produced a canceled cheque in this manner. It is strongly advised not to endorse this cheque.

Cancelled Cheque: A cheque is an instrument that instructs the bank to withdraw a certain amount from the drawer’s bank account and pay it to the drawee or bearer of the cheque. The cheque has three parties:

Cheque Drawer: The person who signs the cheque or asks the bank to pay a specific amount on the cheque is called the cheque drawer.
Drawee of the cheque: The bank that received the order to pay the amount indicated on the cheque is called the drawee of the cheque.
Payee: The person to whom the bank must remit the funds is called the beneficiary.

There are various types of cheques, including crossed, stale, open, self-made, bank and canceled cheques. This article will cover all details about a cancelled cheque and teach how to write one.

What is a Cancelled Cheque?

Cancelled cheques have the word “Cancelled” written on them with two lines drawn through them. There is no requirement to write anything on the cheque other than “Cancelled.” A cheque can be canceled if there is a clerical error, so it is considered a cancelled cheque. Usually, it is terminated to prevent the cheque from being misused by anyone.

However, a voided cheque can prove the person has a bank account. Additionally, voided cheques, even if unusable, will contain additional information such as the account holder’s name, account number, MICR code, IFSC code, address name and branch where the account is held and the cheque number.

When Might You Require a Cancelled Cheque?

In the following circumstances, you might need to send a cancelled cheque:

Mutual Funds: You must create a Demat account if you plan to invest in mutual funds or stocks. In order to open the account and confirm that the bank account linked to the investment is actually yours, the business will ask you for a canceled cheque. According to the Know Your Customer (KYC) regulations, a cancelled cheque is required.
EMI: When purchasing a high-end item or a gadget, Equated Monthly Instalments (EMI) are the preferred way of payment. Even with loans like personal loans, home loans, student loans and vehicle loans, people still make monthly payments. You need to provide a cancelled cheque as evidence that you have a bank account in order to start the monthly installment procedure.
Electronic Clearance Service: A monthly automated withdrawal of funds from your account for all transactions you have completed is known as an electronic clearance service. You must set up the electronic approval service in this situation.
Provident Fund Withdrawal: When you want to take money from your EPF, companies typically require a cancelled cheque.
Dispatching Loans:� Personal loans can be used for anything from paying for a wedding or a house purchase to financing one’s education. Currently, a business lender is required who will grant loans in cash. Loan proceeds are instantly transferred into your bank account. Due to this, they will need a canceled cheque in order to deposit the funds into your account immediately.
Insurance Policy: The idea of insurance and its potential uses are familiar to all of us. A voided cheque is necessary to purchase insurance plans such as health, life, or money back. Your bank account will be debited in a specific sum each month to cover the cost of the insurance. Some insurance companies demand a canceled cheque as part of the application procedure.

How to Write a Cancelled Cheque?

You are permitted to create your canceled cheque to include with your applications. Just follow these easy procedures to create a cancelled cheque :

Step 1: Take a fresh cheque out of your checkbook. Your signature is not required anywhere on the cheque.
Step 2: Draw two parallel crossed lines across the cheque using a blue or black pen. Both ends must be connected by the lines. Give yourself room between the two lines to write.
Step 3: Between those lines, write “CANCELLED” in all capital characters. The use of lowercase characters is acceptable as well.
Step 4: Cheques that have been cashed should not be marked. If a financial institution or other body makes such a formal request, you may be asked to sign it. If you are unsure whether you need to sign anything, it is best to verify with a bank’s management. You have the right to request a written clarification if the validity of the signature request on your canceled cheque concerns you.
Step 5: The use of a cancelled cheque could result in a number of fraudulent actions due to the wealth of data it contains, specifically the following:
1. MICR Code
2. Bank�s name
3. Bank branch
4. Account number
5. Account holder Name
6. IFSC Code

With these data, one or more types of fraud might be feasible. Once you sign something, it is simple for a fraudster to create a copy and use it against you. Consequently, it is dangerous to sign your canceled cheque before sending it. It is always possible to ask your bank for a statement or declaration if you are required to sign the cancelled cheque.

Is Signature Required for Cancelled Cheque?

No, your signature isn’t required on a canceled or voided cheque. As shown in the image below, one will have to write the term “Cancelled” positioned between the two parallel lines across the cheque, to consider it a canceled cheque.

Additionally, you don’t need to write anything on the cheque to identify it as a canceled cheque, except for the term “Cancelled” as shown in the image below.

FAQs on Canceled Cheque

The following are important FAQs about a canceled cheque.�

Q. Do you need to sign the cancelled cheque?
To prevent misuse, it is always advisable not to sign a cheque leaf. An unfilled cheque with the words “cancelled” across it is sufficient to classify a cheque as cancelled. Such a document demonstrates who the owner of a bank account is.

Q. How can I obtain an online canceled cheque?
Through the respective banks’ online net banking services, a cancelled cheque can be acquired. Consumers who use net banking can access these services for free online through bank websites.

Q. Is it safe to present a cancelled cheque?
A cancelled cheque rarely carries any risk. A canceled cheque leaf is only an issue when it falls into the wrong hands and creates the possibility of a fraudulent transaction. Use waterproof ink, do not sign the cheque and only give it to trustworthy parties when canceling a cheque to prevent misuse.

Q. Why do companies request a cancelled cheque?
To verify that their names are linked to the employee’s bank account, many businesses ask for a canceled cheque from their staff. Employees need to provide a valid bank account in order to have their wages credited, so this is crucial for them. In addition, employers may request a cancelled cheque from applicants for a background cheque.

Q. How is a cheque canceled?
A blank cheque can be used to write a cancelled cheque by creating two parallel lines that are diagonally written across the cheque leaf. To designate it as cancelled, place the word “CANCELLED” between the lines’ spaces. You have successfully produced a cancelled cheque in this manner. It is strongly advised not to endorse this cheque.