How to Write a Cancelled Cheque?
You should always cancel a check before submitting it for a particular purpose because checks can be misused otherwise.
Step 1: Start by taking a fresh check from your check leaf that you wish to cancel. Do not sign anywhere on the check.
Step 2: Using a parallel cross line, draw two parallel lines across the check.
Step 3: Write “CANCELLED” between those two lines in capital letters.
IFSC, MIRC, bank name and branch address of the bank in which the account is located are not covered by the parallel lines that you draw across the check.
As mentioned above, you can start from step 2 of the procedure if you wish to cancel a check due to an error.
Even when a check is misused, many fraudulent activities can occur. Nobody can withdraw money from a canceled check. To be on the safe side, do not sign a canceled check when you give it to someone, and also make sure it is handed over to the correct person.
Uses Of A Cancelled Cheque
You cannot withdraw money from a canceled check, but you can use it for several other purposes, including:
- Investing in mutual funds or the stock market requires a number of KYC procedures, including cancelled checks that are helpful for completing KYC. In addition to proof that the individual concerned holds a bank account, the bank name and the branch address of the bank in which the individual holds a bank account, the individual’s name and account number of the bank.
- EMI (Equal Monthly Installments) – Companies and banks offer EMI options with a range of loans, including auto loans, education loans, home loans, and more. A canceled check is required for banks and companies to assign such monthly payment methods.
- DEMAT ACCOUNTS – Demat accounts are used to hold shares in electronic form for individuals, and a canceled check, along with a form for opening an account, as well as other KYC documentation such as identification, address, etc., are required to open a demat account. The stock brokerage requires that the documents be submitted.
- ELECTRONIC CLEARANCE SERVICE: You can transfer funds electronically from one bank account to another by using the Electronic Clearance Service (ECS). If you set up an ECS, then money would be deducted from your account. account every month, and for this deduction, the bank would require a cancelled cheque from you.
- WITHDRAWAL OF EMPLOYEE PROVIDENT FUND (EPF) – The person withdrawing funds from EPF must submit a canceled check to verify their account details.
- OPENING A BANK ACCOUNT – To open a bank account, you must submit a canceled check.
- INSURANCE POLICIES– Some organizations require the purchaser of an insurance policy to provide a canceled check.