Cheques are counted among the most popular and traditional banking instruments in most parts of the world. With the advent of technology, transactions can now be made online just by clicking a few buttons.
However, the use of cheques is still quite popular among those who are suspicious of online methods or those who do not find it comfortable. Canceled cheques are used by everyone as proof of holding that particular bank account.
What is Canceled Check?
A cheque is called ‘canceled cheque’ when two lines are drawn across it and the word “canceled’ is written between the two lines. This cheque cannot be used to withdraw money as the words explicitly mean that it has been canceled.
Canceled Check vs. Returned Check
Another term you might hear when discussing checks is “returned check.” This is another term whose meaning is not immediately clear.
A returned check is a check that is returned to the depositing bank without payment. The depositing bank will take the check to the bank that issued it.
If the issuing bank finds that the person who signed the check does not have enough money in their account to cover the amount on the check, the check will be returned to the depositing bank without any money.
This is bad news for everyone involved. Usually, the process of getting a check returned takes longer than it takes for banks to credit someone’s account for a check deposit.
The depositing bank will have to remove the money from the depositor’s account and explain the situation.
The person who wrote the check will also face trouble. Banks don’t like it when you write a check that is returned. Usually, there are hefty fees when you write a check for more than you have in your account.
Don’t forget that the person who you gave the check will also be coming back to get the money that you owe them.
How to Cancel a Check
To cancel a cheque, you just need to strike two lines across the cheque and write the word “Cancelled” across it. You don’t need to sign the canceled cheque. It only works as a proof that you have an account in the bank.
There is the account holder’s name, branch name and address, account number and MICR Code on the cheque which is enough to submit as proof.
Issuing a Cancelled Check
To cancel a cheque leaf, all you need to do is draw two parallel lines across the cheque and write ‘Cancelled’ in between the two lines. A canceled cheque doesn’t require your signature.
It gives details such as account number, account holder’s name, MICR code, name and branch address of the bank.
Though no one can withdraw money from your account using a canceled cheque, fraudulent activities using a canceled cheque have happened in the past.
So be very careful when you issue a canceled cheque and make sure that the person you are handing it over to is extremely trustworthy. Got it?
Use of Cancelled Checks
- When you take any loan whether it is a home loan, car loan, personal loan, etc., the bank will ask you to submit a canceled cheque.
- When you take consumer durable loan from a store at the time of making a big-ticket transactions and choose to deduct EMIs on standing instruction, then the financial provider will ask for a canceled cheque.
- At the time of investing in mutual funds, the investment organizations emphasize the most on verifying the KYC Details of the customer. So in order to verify your account details, you will be required to submit the canceled cheque.
- When you want to withdraw your provident fund through the offline method, you must submit the canceled cheque along with the other documents to verify that the account details mentioned on the form belong to you and not to anyone else.
- A canceled check is also needed to register for Electronic Clearance Service that automatically deducts the amount from your bank account.
- At the time of purchasing an insurance policy, the insurance company asks you to submit your canceled cheque.
Well, we hope that we have answered all your doubts about a canceled cheque. If you are looking for some investment options, go ahead and explore!