Cancelled Cheque: Its Image And Use


As we all know, a cheque is used to transfer money from the donor’s bank account to the recipient’s bank account. It is a mode of payment widely used in our day-to-day life. Cancelled cheques have great significance in official matters, especially as a means of showing details of a bank account.

In this article, we will discuss the cancelled cheque, how it gets cancelled, and what its uses are. 

What is a cheque and what is it used for mostly? 

A cheque is a mode of transferring money from a person’s account to the person in whose name the cheque has been issued. It is a piece of paper instructing a bank to deduct a specific amount of money from the donor’s account and transfer it to the receiver’s account, with the permission of the donor. 

A cheque is a very conventional and popular way of transferring money, which includes the amount of money, date of transfer, account number, signature, etc. 

What is a cancelled cheque?

A cancelled cheque is a cheque which is crossed with two lines, and in between the lines, the word “cancelled” is marked. It cannot be used for transferring money as it has been cancelled. It is basically cancelled to prevent a cheque which has a chance to get misused in the near future. 

But is this the only reason for which a cancelled cheque is used? You might not agree with this, so let’s read further. 

Although not valid for transferring money, a cancelled cheque still has the account details of the account holder. It still also has the name of the account holder, MICR number, IFSC code, branch name, etc. It is proof that a bank account exists. Cancelled cheques have multiple uses. 

How does a check become a cancelled cheque? 

  • In case you committed an error while filling out the cheque

While writing your cheque, you might commit a mistake like entering the digits wrong, putting your signature in the wrong place, etc. In that case, you cannot erase the mistake, so you have to cancel it and move to write a new one. This is how a cancelled cheque is formed. 

  • As credible proof that you have a bank account

You might simply use a cancelled cheque to show that you have your bank account. To do that, you take out a cheque, purposely cancel it and then use it as proof. 

How to create a cancelled cheque by yourself?

  • Take a fresh cheque that you are going to cancel from your chequebook. Remember, this cheque is still valid as you have not yet cancelled. So, do not put your signature or any credential beforehand. 
  • Diagonally draw two parallel lines across the cheque using your pen. 
  • Now, in between both lines, write “Cancelled” to make sure that you have cancelled the cheque. 

You have successfully created your cancelled cheque, and now it is ready to either be dumped or used for any official purposes. 

Another thing to note is that the parallel lines you have drawn must not cover any of your details. Details like your name in full, IFSC code, MICR number, branch name, etc. If you have made a mistake while filling out the cheque, then the case is different.

Never put your signature on the cancelled cheque because you might not use it to withdraw money anymore, but fraudulent activities might still happen. Your details, like the IFSC code and MICR number, are still mentioned, and you don’t know what can happen with that. In case of official purposes, you don’t need to worry about your cancelled cheque

You might think now, “what official purposes exactly”? The answer to this question is in the next section.

What is the exact use of a cancelled cheque? 

A cancelled cheque can be used for many purposes:

  1. For KYC

Your details are required in a lot of places, including banks, the stock market, etc. For these purposes, you need to show your ID proof, bank account details, etc. A cancelled cheque is a good option for that as it has all your details except your signature on it. 

  1. While withdrawing from Public Provident Fund (PPF)

When you are withdrawing the PPF money that you have saved in your bank account, you are asked for a cancelled cheque to ensure that the account belongs to you. 

  1. Opening a Demat account

While opening a Demat account, you might need a cancelled cheque to show that the bank account belongs to you. 

  1. To process EMIs

EMIs are your equated monthly instalments which you pay to the bank on a monthly basis. But, to process monthly payments, you need to provide a cancelled cheque as proof of having a bank account. 

  1. For Electronic Clearance services

Electronic clearance services or ECS is an automatic deduction process where money is deducted every month from your bank account. For this deduction to process, banks would ask you for a cancelled cheque to seek proof of your having a bank account. 

Summing up

Although it might seem that it doesn’t serve any purpose, a cancelled cheque has multiple uses. Besides coming to pass as a result of incorrect filling out of a cheque, it is purposefully done to induce proof of having a bank account. While financial crime might happen due to carelessness, one must take precautions to prevent it from happening. 

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