To simply put into words a cancel cheque is a type of cheque which has “Cancelled” written on in with two parallel lines run across its top and bottom. This cheque is not a special type of cheque it just carries all the valid information that any other normal cheque would do that is it will have your name, account number, IFSC code, MICR code, name of the bank and branch to which the cheque belongs. All this information is carried across all your cheques as you use it to write an order to the bank to provide you or someone else who has that cheque with the certain of money that is specified on the cheque. Thus, a cheque becomes a very useful entity that can be misused if not handled with proper care and that’s where a Canceled cheque may come in handy as you can share all this personal information to anyone without worrying about the misuse of the check.
How does that work and how many other ways through which a canceled cheque may come is use will be the focus of this article as we understand, what is a Cancelled Cheque?
The uses of a canceled cheque certainly exceed what meets the eye and it’s not just a useless piece of paper. To just start, a canceled cheque is valid proof that you have a bank account in the bank that the cheque specifies and that is the only reason why you have been issued this cheque book.
Though many of you now know how to identify a cancel cheque to write one you may have to keep a few things in mind. Always pick up a fresh check to be canceled. To make sure that in no case you are putting the signature of the account holder, or yours if the account belongs to you. After This, the word canceled should be written in block letters and should be in between those two parallel lines and be made sure to not cut through any vital information that might be necessary for other financial queries or requirements.
Some other essential uses of a canceled cheque may include -:
• Once in a lifetime, you might apply for a huge financial loan to maybe buy a house or an automobile or want to finance your education and for that when you apply to any financer you have to submit a canceled cheque to ensure them that you have a valid bank account through which you can regularly pay for the loan in the form of EMI’s.
• When you apply for a credit card that might give you a personal loan up to lakhs that can be used either way the borrower decides from a sudden medical expense to purchase an expensive item. Thus, it also acts as a valid proof of a bank account. Nowadays many finance companies and started providing special offers when applying for such purchase cards and easy to pay the instalment, though the interest rate charged is usually a bit more than other long tenure loans.
• ECS – This stand for electronic clearance service which is mostly used in the case of big loans in which every month a certain amount of EMI is deducted from the bank and is transferred to the financer.
• In opening a bank account, yes when you open an account in any bank you have to submit a cancelled cheque as to complete the process.
• To know about the customers also known as KYC, many companies or organization that deals in investment especially in mutual funds often adhering to this policy asks for a canceled cheque. You do that so that the bank account is directly linked with your investments and the money can be added and deducted automatically without going through the whole traditional procedure.
• While opening a demart account, this is usually done when someone wants to trade or invest in the stock market, thus to open an account you have to submit a canceled cheque, along with other formalities such as an opening form, ID and address proof through the stock brokerage.
• When withdrawing your EPF which stands employ provident fund, you are required to just simply provide a canceled cheque to verify your bank account details so that it can be transferred easily.
• Insurance has become a huge part of our life as it ensures us from many threats that be arrived uncalled so many people who opt for this option have to provide a canceled cheque to buy insurance so that they can show that they can pay the insurance premium.
These are all the ways through which you can utilize a canceled check, we hope through the course of this article you were able to understand what a canceled cheque means and the places that it can be used and I required. From this, we make sure you now have understood its importance and experience a great banking experience by making wise decisions and be prepared forehand for any such requirements.