What is a Cancelled Cheque and How to Write it in the Right Way?

Cancelled cheques are required by banks or financial institutions to validate the user’s banking details. As a proof of having a bank account, one must submit a cancelled cheque. But the question is, why are cancelled cheques so important?

Read the blog to understand what is a cancelled cheque, how to write it, and when they are used.

What is a Cancelled Cheque?

A cancelled cheque is a crossed cheque with two parallel strike lines. The word “CANCELLED” is written across the cheque between the two parallel strike lines. It is written in such a way so that no other person can misuse the cheque in any way. Though cancelled cheques cannot be used to withdraw money, they are still vulnerable to cyber theft or can be misused as they contain the following information-

  • Account number
  • MICR code
  • IFSC code
  • Bank name
  • Branch
  • Account holder’s name
  • Cheque number

Thus, it is advised to carry the cheque carefully to avoid any mismanagement which can result in fatal financial losses.

How to Write a Cancelled Cheque?

Although not many details are required to write a cancelled cheque, there are still a few things to be written in a cancelled cheque. Follow the given instructions to write a cancelled cheque before you submit it to the bank or NBFC-

  • Take a fresh cheque (Do not write additional information such as Payee’s name, amount, signature, etc. on the cheque)
  • Make 2 parallel lines across the cheque
  • Write “CANCELLED” in capital letters between the 2 parallel lines
  • Make sure the parallel lines do not cover any crucial information such as the account number, IFSC code, MICR code, account holder’s name, bank’s name, or address

When is a Cancelled Cheque Required?

A cancelled cheque is required for many reasons as mentioned below-

  • For KYC completion– A cancelled cheque is the most important thing to submit when you invest in the stock market, mutual funds, or other related financial schemes
  • For EPF withdrawal– The provision of a cancelled cheque is mandatory to withdraw money from your EPF account
  • For electronic clearance service– ECS allows one to transfer funds from one account to another. To activate this facility on your bank account, you will be required to submit a cancelled cheque to your bank
  • For EMIs– Your bank or NBFC will ask for a cancelled cheque before finalizing your EMI payments against an acquired loan or credit amount
  • For Demat Account– If you want to open a Demat account, you need to submit a cancelled cheque along with other KYC documents such as identity proof, address proof, etc.

For Insurance- You will have to submit a cancelled cheque as a proof of your bank account as you buy an insurance policy

FAQs
How to cancel a cheque?
Strike two parallel lines across the cheque and write “Cancelled” in-between those parallel lines.
When does one require a cancelled cheque?
Cancelled cheques are required in the following cases-
  • For KYC completion
  • To open a Demat account
  • To invest in an insurance policy
  • To process the EMI payments
  • To withdraw EPF amount
Is it possible for my bank to cancel my cheque?
No, your bank cannot cancel your cheque on your behalf. It is you who has to cancel the cheque. In case you do not have a cheque, your bank will provide you with the same so that you can cancel it for further processing.
Can I sign a cancelled cheque?
You should not sign and/or write any kind of information like a signature, amount, payee’s name and others on a cancelled cheque.
What are the risks associated with cancelled cheques?
Though cancelled cheques are not risky yet they mention other information like the account holder’s name, bank name, IFSC code, MICR that can be misused. Hence, you should be careful with handling a cheque, irrespective of its type.
Can I cancel the cheque using red ink?
You should always use a black or blue pen to cancel/write a cheque, no other colours are acceptable by the banks, NBFC and others.
Can I block a cheque leaf online?
Yes! You can block your cheque either by connecting with your respective bank or by logging into your official bank website.
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