How to Write a Cancelled Cheque?

Banks and financial institutions often require cancelled cheques for Know Your Customer (KYC) purposes. They can also be used as proof of bank account ownership for various applications, such as opening a new bank account or applying for a loan. In this blog, we will talk about how to write a cancelled cheque and why is it essential for certain transactions. 

What is a Cancelled Cheque?

A cancelled cheque is one that has been rendered unusable for financial transactions. It is cancelled by drawing two parallel lines across the cheque and writing the word "CANCELLED" between the lines.

A cancelled cheque cannot be used to withdraw funds from your bank account or authorize other financial transactions.

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How to Write a Cancelled Cheque?

Follow the mentioned steps to write a cancelled check - 

1. Take a fresh, unused cheque from your chequebook.
2. Draw two parallel lines across the face of the cheque, usually from one edge to the other, ensuring that these lines are drawn in a way that they do not cover any crucial information on the cheque, such as the account number, IFSC code, MICR code, account holder's name, bank's name, or address.
3. In between the two parallel lines, write "CANCELLED" in capital letters. This indicates that the cheque is no longer valid and cannot be used for payment.
4. Write "CANCELLED" in bold, capital letters between the lines. The word should be centred on the cheque and large enough to be easily visible.

Once you have filled out the check with all the necessary information, it will be given to the payee. After the payee deposits or cashes the check, the bank will process it, and the check will be marked as "cancelled" or "void" to indicate that it has been used.

What is the Use of Cancelled Cheques?

Cancelled cheques serve several important purposes:

• Consumer KYC (know your customer) verification: When you open a new bank account, investment account, or credit card account, the bank may ask you to provide a cancelled cheque as proof of your identity and address.
• Mutual fund investments: When you invest in mutual funds, the funding house may ask you to provide a cancelled cheque as proof of your bank account details.
• Provident Fund Withdrawal: Companies usually require a cancelled cheque to withdraw your EPF money.
• Insurance Policy: A cancelled cheque is required even when purchasing an insurance policy.
• Proof of Payment: A cancelled cheque serves as proof of payment because it contains important financial information, such as the account holder's name, bank account number, and MICR code. This information can be used to verify the payment and to track it down in case of any issues. 
• Dispute Resolution: If there is a dispute or discrepancy regarding a payment, a cancelled cheque can help verify the date, amount, and recipient of the payment.
• Tax Documentation: Cancelled cheques can be helpful when preparing your income tax returns. They can record deductible expenses, charitable donations, or other financial transactions.
• Verification of Transactions: In some cases, you may need to prove that a particular transaction occurred, especially if it involved a significant amount of money. Cancelled cheques can be used to verify that a deposit or a withdrawal was made from your bank account.
• Auditing and Compliance: Businesses and organizations often use cancelled cheques to demonstrate compliance with financial regulations and audit requirements and thus keep them as a part of their record-keeping obligations.
• Tracking Payments: Cancelled cheques can help you keep track of your payments and expenditures over time, thus helping you manage finances.
• Payment Verification for Recurring Bills: If you have recurring bills paid by cheque, keeping a record of cancelled cheques can help you monitor the consistency and timeliness of your payments.

Additional Tips 

• Use a black or blue pen.  
• Write neatly and legibly to ensure that your cancelled cheque is processed correctly.
• Avoid crossing out any information on the cheque. 
• Keep a copy of all cancelled cheques for your records. This can help track down lost or missing funds or resolve disputes with your bank. This cancelled check can serve as proof of payment. However, in this digital age, chances are high that you will receive an electronic image or statement confirming the transaction.