What is a Cancelled Cheque? [What is it and how to cancel]

There are many ways of completing transactions in the digital world like net banking, mobile banking, digital banking, UPI payments, cryptocurrency, etc. Through these methods, transactions can be completed within just a few clicks. Still, cheques are the most used and most trusted option for engaging in financial transactions.

A specified sum mentioned in the cheque is transferred from the bank account of the payer to the payee. The cheque issuer is liable to pay a certain amount to the cheque holder. A cancelled cheque can be requested in many situations to know your bank account details for official purposes.

A cheque is a legal, financial instrument that authorises a bank to transfer a specified amount of money from a person's account to the person named on the cheque.

In this article, we will learn how to cancel a cheque. But before that, let us first understand the difference between cancelling and stopping a cheque and the reasons for both.

Cancelling of Cheque v/s Stopping of Cheque

Yes. Both are different terms. We cancel a cheque when we have given our bank account details and we want to cancel the payment. On the other hand, stopping a cheque payment is where you can stop the payment if the cheque is issued to any party and is not yet encashed.

Reasons to Stop a Cheque Payment

• Goods and services for which the cheque is paid are not delivered.
• If you do not have enough funds in your bank account. Stopping the cheque payment is a better option than a bounced cheque because a bounced cheque is a legally punishable offence.
• Post, pre, or wrongly dated cheque.

How to Stop a Cheque Payment?

There are several ways to stop cheque payments. Some of them are mentioned below-

• Net Banking
• Mobile Banking
• ATM
• By visiting the branch of the bank
• Customer care

Various documents and a small fee are required to stop cheque payments. Also, you will require your account number to cancel the cheque.

What is the reason for a cheque that bounces in the mail?

There might be several reasons for a cheque bounce, but the most common reason is inadequate funds in the bank.

Reasons for Cancellation of Cheques

Before knowing how to cancel a cheque, you should know the reason for such cancellation.

When two lines are drawn across a cheque and the word "cancelled" is written between the two lines, it is referred to as a "cancelled cheque." This cheque cannot be encashed since the words plainly state that it has been cancelled.

Some of the reasons for the cancellation of a cheque are as follows:

• You do not wish to pay by cheque

If you suspect that the individual receiving the payment via your cheque is defrauding you, you have the option to cancel the payment before it is processed by the bank.

• Your cheque book is missing/ has been stolen

If your cheque or cheque book is missing or has been stolen, you must cancel it as soon as possible. Simply notify your bank and request that one or all of your cheques be cancelled.

• Your financial institution or Online Payment Gateway Provider is validating the information

If you wish to use an online payment gateway, you must first provide a cancelled cheque to the firm that provides the online payment gateway.

• Sending cancelled cheques to Mutual Fund Companies to provide KYC details

Mutual funds may require your cancelled cheques for verification of your bank account information at times.

• Obtaining a loan based on EMI

If you wish to borrow money from a bank based on EMIs, the bank will require you to submit a cancelled cheque.

• To open a DEMAT Account for buying and purchasing and shares

You may be required to provide a cancelled cheque when opening your DEMAT account. You can trade in stocks only after opening the DEMAT account.

• To obtain EPF (Employee Provident Fund) Funds

If you choose to withdraw your EPF funds, the Employees Provident Fund Organisation (EPFO) will keep a record of your cancelled cheque.

• For ECS (Electronic Clearing Services)

If you wish to deduct money for bills or other payments via ECS, you must present your cancelled cheque to them.

• Opening a new bank account

It also serves as identification when opening a new bank account.

• Insurance Policy.

For a new insurance policy, insurance companies may occasionally request a copy of your cancelled cheque for record-keeping purposes.

Important Things to Know About a cancelled cheque

A cancelled cheque is essentially a vital source of information. When certain data such as a bank account number, IFSC code, etc., are required, sending a cancelled cheque merely implies that you have provided the essential information accurately. This may include:

• The bank's name
• Account holder's name
• Bank account number
• International Financial Services Code

How To Cancel a Cheque?

The cheque should be properly cancelled to prevent its misuse.

To cancel a cheque, just strike two lines across it and write the phrase ‘cancelled’ across it. You are not required to sign the cancelled cheque. It simply serves as verification that you have a bank account. On the cheque, there is the account holder's name, branch name and address, account number, and MICR code, which is sufficient to be presented as proof.

It is important to remember to never sign a cancelled cheque.

How do you write ‘cancelled cheque’ on a cheque?

When you draw two lines across a cheque and put the word 'cancelled' inside the two lines, it's called a 'cancelled cheque.' There is no need to write anything other than this on the cheque.

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FAQs

Q. Which colour pen should we use to write a cheque?

Ans. Blue or black. It is always preferable to write a cheque in blue or black ink because many banks do not accept red and green colours.  

Q. What details may be gleaned from avoided cheque?

Ans. The details on the cancelled cheque might include your bank account number, the branch name and location, and the MICR code.

Q. Is it necessary for me to sign the cancelled cheque?

Ans. No. No parties are required to sign a cheque. However, in some countries, the signature of the manager of the bank and details of the bank and the reason for cancellation are to be mentioned.

Q. Are there any negative consequences to cancelling a cheque?

Ans. No. Because a cancelled cheque cannot be used to withdraw money from your account.

Q. Can you use a cancelled cheque for anything?

Ans. A cancelled cheque serves as confirmation that you have an account with the specified bank. This may be necessary when applying for a loan, participating in mutual funds, establishing an Electronic Clearance Service, purchasing insurance, and other related situations.

Q. Why is my bank refusing to cash my cheque?

Ans. If you have issued or received a cheque connected to an account that has less money than the amount printed on the cheque, the bank will not be able to complete the transaction and will halt the payment and dishonour the cheque.