What is a Cancelled Check?

A cancelled check is a check payment for which the stated amount of cash has been removed from the payer's checking account. Once the cash draw down is completed, the bank stamps the check as cancelled. Once a check is cancelled it can no longer be used as an authorization to remove additional funds from the account of the payer. A cancelled check has passed through the entire set of payment activities, which include the following:

Received by the payee
Endorsed by the payee
Deposited with the payee's bank
Paid by the drawee bank to the payee bank
Cash is paid into the payee's account by the payee bank

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How to Access Cancelled Checks

There are two ways to access cancelled checks, which are noted below:

Online access. A payer can verify whether the checks it has issued have been classified as cancelled by accessing the on-line check record posted by the payer's bank. This information is most commonly used as part of the bank reconciliation process, but can also be used to prove to a payee that a check payment was made, and that the check was cashed. When a payee claims not to have received a check but it was cancelled, it is possible that the check was intercepted and fraudulently cashed by someone else.
Physical access. Less commonly, the bank mails all cancelled checks back to the payer along with the monthly bank statement. If so, the payer typically stores the checks as evidence of payment, and eventually shreds them once the company-mandated retention period has passed. A variation on the concept is for the bank to print check images in reduced size on the back of the bank statement, or on accompanying pages.

Cancelled Checks vs. Returned Checks

The key difference between a cancelled check and a returned check is that a cancelled check is honored by the bank, while a returned check is not. This means that the party being paid via a check will not receive cash when the check is returned. A check return usually occurs because the payor does not have sufficient funds in its checking account, though it is also possible that the checking account was closed, or that the payor issued a stop payment notification to the bank.