What is a cancelled cheque?
A cancelled cheque is typically proof verifying the fact that you have an account with that particular bank. Once cancelled you don’t need to sign the cancelled cheque. The cancelled cheque format is fairly easy to understand. Any cheque that has been crossed by making two lines across it and writing “cancelled” is called a cancelled cheque. The process of cancelling a cheque was started to make sure that the cheque doesn’t get misused.
What are the different scenarios in which you need to sign a cancelled cheque?
Generally, people come across the process of cancelling a cheque in a bank. However, its uses go beyond cancelling cheques. Some of the most common uses of cancelling a cheque include:
- Open a current account or a savings account – When you apply to open a new bank account, you are required to sign a few blank cheques that are used by the bank if the need arises. These signed cheques are then cancelled by the bank and returned to the account holder.
- EPF withdrawals
- Electronic Clearance service
- For loan processing- when applying for a personal loan, it is necessary to submit a few documents like salary slips, form 16, address proof etc. along with cancelled cheques of your salary account so that the lender can verify your banking details and payout your loan amount directly into your account. Having said that, some lenders also ask for post-dated cheques as security against repayment
- For purchasing insurance
- For opening a Demat account
- When applying for Personal Loan – When applying for a personal loan, it is necessary to submit a few documents like salary slips, form 16, address proof etc. along with cancelled cheques of your salary account so that the lender can verify your banking details and payout your loan amount directly into your account. Having said that, some lenders also ask for post-dated cheques as security against repayment of EMI.
- When applying for a Credit Card or Debit Card – You need to submit a cancelled cheque while submitting your credit card application. The cheque helps the bank/credit card issuer to verify your account details and process the bill payment on your behalf. Visit this page for more info.
- When setting up an Auto Debit Facility – When you set up an auto-debit facility on your bank account, you require to submit a cancelled cheque so that the bank can verify whether the account belongs to you or not.
- While applying for an Overdraft Facility – For availing of an overdraft facility, you need to submit a cancelled cheque of your current account along with other required documents so that the lender can verify your banking details and set up the overdraft facility accordingly.
- When buying a car – When you are buying a car on EMI, you may be asked to provide a cancelled cheque as a mode of payment. These are also called Post-dated Cheques (PDC). PDC is a written order addressed to the banker by the drawer to pay a specified amount of money to the payee on the date mentioned in it. It is payable on demand or at sight or after a certain period or on a specific date.