A canceled cheque is one that has the word "canceled" written across it and is crossed with two lines. There is no requirement for anything else to be written on a check but the term "canceled." A cheque may be canceled if any mistakes were made when writing it, which is why it is known as a canceled cheque. Usually, it is canceled to prevent the check from being utilized improperly by anyone.
A cheque is a negotiable instrument that instructs the bank to withdraw a certain amount from the drawer's bank account and pay it to the person to whom it is issued, to the person to whose order it is issued, or to the bearer of the cheque. There are three parties to a check:
The individual who signs the check or instructs the bank to pay a specific amount through a check is known as the drawer of the cheque.
recipient of the check: The drawee of the check is the bank that has been instructed to pay the specified sum in accordance with the check.
Payee: The individual to whom the bank is required to deliver the funds is referred to as the payee.
However, a canceled cheque serves as evidence that the person has a bank account. In addition, a canceled cheque contains other information, such as the name of the account holder, account number, MICR code, IFSC code, name and branch of the address where the account is located, and cheque number, even though it cannot be used to withdraw money from the drawer's account.
Although a voided check cannot be utilized to obtain cash, there are various other uses for it. Among the uses of a canceled check are a few of the following:
Canceled checks are helpful for different (KYC) procedures when investing in mutual funds or the stock market because they contain important information like the proof that the person in question has an account in a bank, their name and account number, and the name and branch address of the bank where they have an account.
EMI choices are available for a variety of loans, including home loans, student loans, car loans, and others. In order to complete the necessary paperwork to designate such monthly payment options, the bank or corporation in question would need a canceled check.
To open a demat account, the stock brokerage must receive a canceled check, a form for opening an account, and other KYC papers, such as evidence of identity and proof of address. A demat account is used by individuals to keep shares in electronic form.
ECS is an electronic method for transferring money between bank accounts. If you set up an ECS from your account, money would be taken out of the account each month, and the bank would need a canceled check from you for this deduction.
Opening a bank account requires the submission of a canceled check in order for the procedure to be completed.
Some businesses want a canceled check from a potential policyholder when they choose an insurance policy.
It's crucial to cancel a check because they can otherwise be readily misused. The actions listed below should be performed if you are canceling a check to submit it for a specific reason:
1. Take a new check out of the leaf containing the one you want to cancel. Do not sign the check anywhere.
2. Cross the check with two parallel lines.
3. Capitalize the word "CANCELED" between the two lines.
A simple way to cancel a check is to cross it with two lines and write the word "CANCELED" in capital letters between the two lines.
Canceled checks come in handy on a number of instances when they are required as part of processes like KYC, EMI, ECS, when choosing an insurance policy, when opening a Demat account, when withdrawing PF, and when opening bank accounts.
No bank is allowed to cancel your check.
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