What Is a Canceled Check?

Paper checks have long been the means to pay bills and make purchases using money that is deposited into a bank checking account. A canceled check is one that has made the journey from being written, deposited and paid to the receiving vendor. The check is then stamped as canceled or complete and returned to the account holder.

A canceled check serves as a receipt for items purchased or bills paid. Canceled checks also allow the account holder to track expenses and are essential for balancing the bank statement every month. A canceled check can also be used during an IRS tax audit to show proof of a charitable contribution or other deduction.

At one time, banks sent each individual canceled check back to the account holder in the monthly statement. Now, it is more likely that the check will be scanned, and a statement will include only the scanned image of each check.

The time it takes a check to process from being written to becoming a canceled check depends on several factors. The first is how long it takes for the receiver of the check to deposit, or cash, the check. It then takes several days for the check to make its way through the system of banks before funds are actually transferred and the check is considered paid and canceled.

A canceled check, either the check itself or the scanned copy, will have identifying marks showing which bank the check was deposited in and the account holder's bank ID showing that the check has cleared. Some banks put identifying marks on both the front and the back of the check, so the check cannot be presented a second time for payment.

Once a check has been canceled, it means the money has been drawn from the account holder's checking account. That money cannot be used to write another check or be withdrawn for other purposes.

It is important to keep a record of the checks that are written and deduct the amount of the check from the balance of the account. This prevents overdrafts, an additional fee the bank charges for insufficient funds. It is also important to reconcile your bank statement to make sure that all checks have been deducted and you know which checks are still outstanding.

Paper checks are being replaced with debit cards at many banks, although some businesses are not set up to accept the cards and still require either a check or cash as payment. As the technology spreads for debit cards, handwritten or computer-printed checks may become a thing of the past.