Cancelled Cheque: Meaning, How to Write, Uses and Tips

Posted on Monday, September 9th, 2024 | By IndusInd Bank

When you join a new employer’s payroll or apply for a loan, you must promptly provide your bank details.  

A cancelled cheque can simplify this process. It is a common financial document used for verification with no validity for transactions. 

Let’s explore what a cancelled cheque is, how to write one, and where it is usually required.

What is a Cancelled Cheque? 

A cancelled cheque is simply a regular cheque that has the word “CANCELLED” written across it in bold letters, usually in all caps. It’s not meant to be used for making a payment. Instead, it’s typically provided as proof of your bank details. 

Even though the cheque is not usable for transactions, it still shows important information like: 

• Your name (if it’s a personalised cheque) 

• Bank account number 

• IFSC code 

• MICR code 

• Name and branch of your bank  

All of these details make a cancelled cheque a handy document when verifying banking information.

Significance of Cancelled Cheque 

So why are cancelled cheques even a thing? 

Well, they’re often required in a variety of formal and financial setups. Here’s where you might be asked to submit one: 

• While setting up Electronic Clearing Service (ECS) for salary credit or loan repayments 

• For Know Your Customer (KYC) documentation 

• When opening a demat account 

• While registering for mutual fund investments 

• When applying for an insurance policy 

• For employee verification during onboarding 

Since a cancelled cheque proves that a bank account exists and belongs to you, it’s a trusted tool, especially when accurate banking details are needed but a payment isn’t involved.

How to Write a Cancelled Cheque 

Here’s a step-by-step guide on how to cancel a cheque: 

1. Take a Cheque Leaf

Use a fresh cheque from the chequebook associated with your bank account. 

2. Draw Two Parallel Lines

Across the cheque, diagonally draw two parallel lines. Make sure the lines do not cover or hide the essential bank information. This can include the account number, account holder’s name, MICR code, branch name and address, etc.  

3. Write ‘CANCELLED’

Write the word ‘CANCELLED’ between the parallel lines. Make sure not to sign the cheque or fill in any other details. 

Now you know how to write a cancelled cheque. Remember to follow the precautions, such as not signing the cheque, to ensure it serves its purpose without misuse. 

Tips to Avoid Fraud Associated with Cancelled Cheque 

While cancelled cheques are useful, they do carry a small risk, if they fall into the wrong hands. Here are a few simple precautions to keep in mind: 

• Write “CANCELLED” in bold, clear letters across the cheque to ensure it can’t be misused. 

• Don’t sign the cheque. There’s no need to, as your account details are proof enough. 

• Avoid leaving any other fields blank and untouched (like amount or date). Cross them out if needed. 

• Give it only to trusted parties or when officially required, not for casual use. 

• Keep a scanned copy or record in case it’s ever questioned or lost. 

A little care goes a long way in keeping your financial information secure.

Uses of a Cancelled Cheque

Knowing how to cancel a cheque can prove beneficial in various scenarios, such as when: 

1. Setting Up Electronic Fund Transfers

You might need to provide a cancelled cheque when setting up electronic funds transfers to receive salaries or other payments. Employers or financial institutions use a cancelled cheque to verify bank account details.  

2. Applying for Loans

Financial institutions often ask for a cancelled cheque when you apply for a loan. This helps ensure they have the correct bank account information. 

3. Opening Investment Accounts

A cancelled cheque is often requested to verify your account details when opening a new DEMAT account.   

4. Setting up Automatic Payments

A cancelled cheque may be required to validate your bank account when setting up EMI payments. 

5. Carrying out KYC Verification

Cancelled cheques are sometimes required for Know Your Customer (KYC) processes. This helps ensure your banking details and identity.  

Also Read: Understanding eKYC- What You Need to Know 

Steps to Take if a Cancelled Cheque Gets Lost 

Misplaced a cancelled cheque? Don’t panic. Here’s what you can do to stay safe: 

Step 1: Inform your bank immediately. While cancelled cheques can’t be used for transactions, it’s still a good idea to alert them. 

Step 2: Keep an eye on your account activity to catch any unusual transactions. 

Step 3: Notify the party you gave it to (if applicable), so they can avoid acting on it. 

Step 4: Keep a record of what was written on the cheque, like the cheque number and date issued, if possible. 

Step 5: Consider placing a stop or freeze on that cheque number, though it may not always be required. 

Taking these steps helps you stay in control and avoids any misuse, even if the risk is low.

Conclusion

A cancelled cheque is an essential document for various banking and financial processes. Know how to cancel a cheque to make things easier when you apply for a loan, open investment accounts, set up EMIs, and more. Remember to follow basic precautions to ensure a safe process.  

Whether you want to provide a cancelled cheque or transfer funds, a good banking partner is important. This is why you must open a bank account with IndusInd Bank.   

We offer convenient digital banking services, solid customer support, attractive interest rates, feature-rich debit cards, and more. The best part? You can open a new savings account digitally, within minutes!  

Open a Savings Account online with IndusInd Bank now!  

Disclaimer: The information provided in this article is generic and for informational purposes only. It is not a substitute for specific advice in your circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any financial decisions based on the contents and information.