What is Cancelled Cheque? Why Is It Used?

IamCheated.com Research Team | April 26, 2018  7:43:pm

Almost everyone is aware of payments through cheque, but many are still confused what a cancelled cheque means. When most of the banking services have gone online, issuing a cancelled cheque needs to be done manually.

A cancelled cheque is a cheque that is crossed and the word "cancelled" is written across. Other than this nothing else will be written on the cheque. A cancelled cheque is proof that you have an account with the bank. The cancelled cheque is used to give other information such as account number, cheque number and MICR code to whosoever is concerned.

What information is available on a cancelled cheque?

  • Account Holder’s name
  • Account number
  • IFSC
  • MICR
  • Name and address of the bank

How to issue a cancelled cheque?

To issue a cancelled cheque, all you need to do is strike off the cheque by drawing two parallel lines and write cancelled between them. Do not sign or  mention a date on it.

Uses of a cancelled cheque

 1. Electronic clearance service (ECS)

The cancelled cheque is required for Electronic Clearance Services (ECS), which is required to deduct money from your account every month.

2. Equated Monthly Installments (EMI's)

While availing various loans such as home loans, car loans, education loans and consumer durable loans, you are required to provide cancelled cheque to clear the loan process. It is proof that you hold a bank account.

3. Employer's Provident Fund (EPF)

To ensure that the money goes to your account, companies ask for a cancelled cheque at the time of withdrawing the provident fund amount.

4. Insurance policy

You must submit a cancelled cheque to your insurer while purchasing a new insurance policy.

5. KYC

 Know your customer (KYC) is required for almost all investments these days. If you want to invest or trade in stocks, you must have a demat account. To open a demat account, you are required to submit a cancelled cheque to your stock broker. KYC is also required for a mutual fund.

Have a complaint against any company? IndianMoney.com's complaint portal Iamcheated.com can help you resolve the issue. Just visit IamCheated.com and lodge your complaint.