What is a Cancelled Cheque: How to Write it & When is it Required?

When you write “Cancelled” on a fresh cheque from a book, that is called a cancelled cheque. A cancelled cheque is an unused cheque that is made for KYC verification, loan applications, mutual fund investments, insurance policies, salary account verification, and Electronic Clearing Service (ECS) registration. It is a printed cheque issued by the bank.

Key takeaways 

• On a simple unused cheque, draw two parallel lines and write “cancelled” on it. This cheque becomes a cancelled cheque. 
• Cancelled cheques are important for KYC verification, loan applications, and SIP registration.
• You should not sign a cancelled cheque or alter any important details printed on the cheque.
• You can use alternatives like a copy of your passbook or a bank account statement instead of a cancelled cheque. 

What Is a Cancelled Cheque?

On the cancelled cheque, “CANCELLED” is written in front between two parallel lines. If your cheque is cancelled, you can not withdraw money or make a payment. 

A cancelled cheque contains the following details:

• Account holder's name
• Bank account number
• Bank name and branch
• IFSC code
• MICR code
• Cheque number

Cancelled cheques are not useless. 

These are used for verification of bank account details for KYC, salary accounts, loan applications, insurance policies, EMI registration, electronic fund transfers (EFT), and other financial transactions. 

What is the use of a cancelled cheque?

A cancelled cheque is not just useless paper. It is used for various reasons:

• Some landlords or property managers may ask for a cancelled cheque to verify your bank account.
• A cancelled cheque can be used when applying for government subsidies.
• If you transfer your existing loan to another lender, a cancelled cheque can be required to verify your bank account and set up EMI payments.

Why is a cancelled cheque necessary?

As I mentioned above, a cancelled cheque is used to verify your bank details. You can not make a payment from it, but it shows that the account is yours. A cancelled cheque is used for the following things:

1. Many banks ask for cancelled cheques during the KYC process.
2. It is important when you are opening investment accounts, purchasing mutual funds, or using other financial services.
3. It is also used to set up Electronic Clearance Service (ECS) or auto-debit payments.
4. It is also used during loan applications. Banks and lenders can ask for a cancelled cheque when you apply for a loan.

This is why a cancelled cheque is important. 

What are the disadvantages of a cancelled cheque?

A cancelled cheque is not used for payment, but it has all the bank details. So keeping it safe is important. Here are potential risks of cancelled Cheques.

1. Important details on cheques can be used for fraudulent activities. 

Actually, a cancelled check is safe, but it is important to handle it carefully. 

How to cancelled a cheque?

Now you know where the cancelled cheque is needed. If you want to write a cancelled cheque, you can easily do it; just follow these steps:

1. Take a cheque leaf from your cheque book.