What is a Canceled Check?
A canceled check is a check that has cleared or prevented from clearing.
How Does a Canceled Check Work?
Let's say John Doe writes a $100 check to Jane Smith. She takes it to her bank to cash it. The bank takes the check, deposits $100 into Jane's account, and presents the check to John's bank for payment. John's bank receives the check, deducts $100 from his account, and sends him the canceled check with his month-end statement as proof that the check was received and paid.
If John wrote the $100 check to Jane and Jane lost the check, John can call his bank and put a 'Stop Pay' on the check. Then he writes Jane another $100 check, which she promptly cashes. If Jane or someone else happens to find the first lost check and tries to cash it, the Stop Pay will flag the check as invalid. In this sense, John has canceled the check.
Why Does a Canceled Check Matter?
A canceled check is proof of payment. In many cases, customers have to request copies of canceled checks if they get their monthly statements online instead of on paper. It is important to note that you should keep canceled checks hidden or securely stored; the routing number and account number printed on the check can be used by identity thieves.