Understanding the Concept of a Cancelled Cheque and the Correct Way to Fill it Out.
Financial institutions and banks may necessitate the submission of cancelled cheques to verify the accuracy of a user's banking details. These cheques serve as supporting evidence of a legitimate bank account. Understanding what a cancelled cheque entails, how to properly complete one, and when it may be requested is crucial in utilizing them effectively for financial matters.
The Definition of a Cancelled Cheque
A cancelled cheque refers to a crossed cheque which bears two parallel lines across it and the marking "CANCELLED" written in between. This renders the cheque unusable for any unauthorized financial transactions.
Nonetheless, cancelled cheques still contain sensitive information like the account holder's name, account number, cheque number, MICR code, and IFSC code, which could potentially be exploited or misused by cybercriminals. Consequently, it is of utmost importance to handle these cancelled cheques with care, ensuring they are both securely stored and disposed of.
How to Properly Fill a Cancelled Cheque
When submitting a cancelled cheque to a bank or non-banking financial company (NBFC), it is essential to adhere to the provided instructions.
- Retrieve a fresh cheque (Avoid including any additional information such as the payee's name, amount, signature, etc.)
- Draw two parallel lines across the cheque
- In capital letters, write "CANCELLED" between the two parallel lines
- Ensure that the parallel lines do not cover any vital information such as the account number, IFSC code, MICR code, account holder's name, bank's name, or address
Further Reading: A Comprehensive Step-by-Step Guide on How to Write a Cheque
Instances Requiring a Cancelled Cheque
A cancelled cheque serves various purposes, as outlined below:
- KYC Completion: A cancelled cheque, marked as paid and labeled "cancelled" on its face, is a critical document to submit when investing in the stock market, mutual funds, or other financial schemes.
- EPF Withdrawal: In order to withdraw funds from your Employee Provident Fund (EPF) account, a cancelled cheque is mandatory.
- Electronic Clearing Service (ECS): To enable the Electronic Clearing Service for your bank account, facilitating the transfer of funds from one account to another, the provision of a cancelled cheque to your bank is necessary. It is a prerequisite for activating the ECS facility on your account, which grants you the ability to conveniently and securely transfer funds to other accounts.
- Equated Monthly Installments (EMIs): Before finalizing the Equated Monthly Installments (EMIs) for a loan or credit amount, your bank or non-banking financial company (NBFC) will request a cancelled cheque. This is essential to process your EMI payments, as the cancelled cheque serves as evidence of your bank account from which the EMI amount will be directly debited each month.
- Demat Account: While opening a Demat (Dematerialized Securities) account, you must provide designated Know Your Customer (KYC) documents, including proof of identity and address. Additionally, a cancelled cheque must be submitted. This serves as proof of your bank account, which will be linked to your Demat account for the purpose of purchasing and selling securities.
- Insurance: When acquiring an insurance policy, proof of your bank account is required. One way to fulfill this requirement is by submitting a cancelled cheque. This serves as evidence of your bank account, which is necessary for the insurance company to process premium payments and conduct other financial transactions related to your policy.
How to void a check?
Draw two parallel lines across the check and write "Void" in between those lines.
When do you need a voided check?
Voided checks are necessary in the following circumstances:
Can the bank cancel my check for me?
No, the bank cannot cancel your check on your behalf. You are responsible for canceling the check. If you don't have a check, your bank will provide you with one to cancel it for further processing.
Can I sign a voided check?
You should not sign or provide any information such as a signature, amount, or payee's name on a voided check.
What are the risks associated with voided checks?
While voided checks are not inherently dangerous, they contain sensitive information such as the account holder's name, bank name, IFSC code, and MICR that can be misused. Therefore, it is essential to handle checks with caution regardless of the situation.
Can I use red ink to void a check?
Always use a black or blue pen when voiding or writing a check. Banks, NBFCs, and others do not accept any other colors.
Can I block a check leaf online?
Yes! You can block a check by contacting your bank or accessing your bank's official website.
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