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The phrase canceled check may sound confusing, but it’s actually a simple concept. A canceled check generally refers to a check that was processed, cleared, and paid by the bank. It means the check-writing system worked as it should and money has been transferred appropriately.

What Is a Canceled Check?

A canceled check is a check that is processed and paid and cannot be used again. If you write a check to your sister or to the electrician and they deposit or cash it, the funds are taken from your checking account and paid to them (or put in their account). Your bank will cancel the check, meaning that the check has done its job and served its purpose.

Sometimes you may be asked to show a canceled check to prove that payment was made. For instance, if you paid a bill by check but the payee believes they haven’t received the funds, you could send them an image of the canceled check from the bank to prove that you settled the account. You may be able to obtain such images within a certain time frame from your bank or credit union.

How to Write a Canceled Check

You can’t write a canceled check. Only a bank can cancel a check. What you as a banking customer can do is void a check — by writing the word “void” across it, as you may need to do as part of the process of setting up direct deposit or autopay. If you need to stop a check from being paid, you can put a stop payment on it via your financial institution (more on that below).

One thing to be aware of if you are dealing with a financial transaction in another country: In some countries, the term “canceling” is used instead of voiding a check, which can cause a bit of confusion. In this case, make sure you understand what the term “canceled check” means in the country you are dealing with.

Examples of Canceled Checks

Once you open a bank account, you will likely hear the term “canceled check.” Here’s what is usually meant by that term:

•   A canceled check is one that is cleared and paid by the bank. Funds have been transferred, so the transaction is completed.

•   The term is sometimes used incorrectly to refer to a check you put a stop payment request on. You might say, “I canceled that check,” meaning you instructed your financial institution not to pay it. However, what you actually did was tell the bank to stop payment of the check.

•   You may hear some people say “canceled check” when what they are really referring to is a voided check. A voided check is usually one that you write “void” on. You may need to provide a canceled check when setting up certain transactions, such as direct deposit.

•   What these checks all have in common is that they are out of circulation and not to be reused.

Canceled Check Fees

When a bank cancels a check after clearing it, there is no fee. This is a standard transaction at your bank or credit union. But a stop payment request can run about $15 to $35, depending on the bank. When you void a check, no fee is involved.

Canceled Checks vs Returned Checks

What are canceled checks and returned checks? They differ considerably: One is paid, the other isn’t. Here is the difference between them.

•   Payment. A canceled check has been paid (cleared) by the bank it was drawn on. A returned (or bounced) check is not paid or cleared by the bank because the account holder has insufficient funds.

•   Consequences. Since canceled checks are standard practice, there are no negative consequences for you. However, with returned checks, you will likely face repercussions. Your bank will probably charge you an overdraft fee of $35 or more, and the business you tried to pay may charge you for the work of dealing with a bounced check, sometimes called bounced check fee, which could be $30 or more. In addition, your payment is probably now considered late, which might trigger more charges and possibly affect your credit standing.

•   Your good standing. A check canceled by the bank as part of the standard practice should not cause you any problems. But banks and businesses tend to look unfavorably on returned checks and the fees and headaches that come with them.

Banks generally do not report returned checks to credit bureaus, but this activity may turn up on your banking record, which is monitored by agencies like ChexSystems. Too many returned checks, and you may find that you could be denied a bank account in the future.

It’s also important to keep payments up to date at places where you do business so as not to negatively impact your credit score.

Canceled Checks vs Stop Payment Requests

Canceled checks and stop payment requests are two very different things. Here are some of the most significant differences.

•   Contact with the bank. A canceled check is standard practice and typically sails through the system. The bank handles the process, and you don’t need to do anything. But a stop payment request requires a call or visit to your bank right away or for you to engage with the bank’s website or app. This process needs to be done quickly, before the check is presented to deposit or cash. If your check or checkbook is lost, you think your check was stolen, or you need to halt a payment, know that many bank phone support lines operate 24/7.

•   Fees. Canceled checks don’t cost you, but stop payment requests do. (See above.)

•   Time window. Checks are typically canceled within a couple of days of their submission, though timing can vary depending on how they were submitted (say, via your bank’s app or into an out-of-network ATM). Once checks are paid by your financial institution, they cannot be reused, and that’s final. Stop payment requests, however, usually last only up to six months, and you may need to renew them after that if you think there’s a chance someone might still try to cash the check.

How Long Until a Check Becomes Canceled?

As mentioned above, it typically takes about two business days for a deposited check to clear, but it can take a little longer — about five business days — for the bank to receive the funds. The length of time depends on the amount of the check, your relationship with the bank, how and where you deposited it, and whether your account is in good standing (no frequent overdrafts or prolonged negative balances). Another factor that could impact processing: If you let a check sit for a few months before depositing it, that check could reach its expiration date and no longer be valid.

Recommended: How Long is a Check Good For?

Tips on Using Checks

With the use of online banking and bill pay, checks aren’t used as often as they once were. However, many people still order checks and they remain an important financial tool. For these reasons, it can be worthwhile to brush up on how to use them most effectively.

•   Record each check you write and each checking account deposit you make in the transaction register. Include check number, date, payee (or source of deposit), and amount.

•   Use the columns with a check mark on top to check off deposits or checks paid once they are cleared by your bank and reflected in your balance.

•   Keep your checkbook in a safe place, as you would a debit or credit card. Checks can be forged by another person.

•   For important payments, such as rent, child support, healthcare, and donations, consider keeping a copy (front and back) of canceled checks. Banks used to return these checks with paper statements, but no more. At many banking websites, you can download PDF images to save or print. Or call your bank to request scanned images up to seven years old or more (sometimes for a fee).

If you still have questions about checks, visit your bank’s website or talk with a bank representative in person or by phone.

Banking With SoFi

With SoFi Checking and Savings, you can smoothly manage your money all in one place. Click on the app or website to see transactions at a glance, including checks you wrote that have been cleared and deposits you’ve made.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

Is a canceled check the same as a voided check?

People sometimes use the terms interchangeably, but technically speaking, they have different meanings. While both checks are unable to be used, a canceled check is one that has been paid by a financial institution. A voided check is one that you, the account holder, has written the word “void” on to make sure the check is not used to transfer funds.

Can you use a canceled check?

No, you cannot use a canceled check. It has been processed, meaning the funds were transferred as directed, so its job has been completed.

Photo credit: iStock/PeopleImages

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

3.60% APY
Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 11/12/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

SOBK-Q224-1927461-V1

A debit memorandum is a notice issued to customers from a bank or a business, informing them of an adjustment being made to their account balance. In all cases, a debit memo means that money will be taken out of an account to cover a fee or an underpayment.

Debit memos occur both in personal banking — like for a bounced check or insufficient funds fees — but are also common in business-to-business (B2B) transactions. They are often to correct an erroneous invoice or respond to changing market prices. Understanding how debit memos work can help you stay on top of your money.

What Is a Debit Memo?

A debit memo is a notice from a financial institution or a business to a customer that there is a forthcoming adjustment (a debit or withdrawal of funds) to their account. You may also hear it referred to as a debit memorandum or debit note.

A debit memo might show up on your bank statement for an atypical fee, like for ordering checks or for overdrafting. Normal checking account debits, like from a swiped debit card or a cashed check, are not classified as debit memos and will not appear on a bank statement as such.

In B2B transactions, a company may issue a debit memo after invoicing if there was something incorrect on the original invoice. Typically, this happens if the customer was undercharged.

💡 Quick Tip: Typically, checking accounts don’t earn interest. However, some accounts do, and online banks are more likely than brick-and-mortar banks to offer you the best rates.

How Does a Debit Memorandum Work?

In banking, if you have incurred a fee, such as an overdraft fee, the bank will add a debit memorandum to your monthly bank statement. If you use a digital banking app, you can often see this debit note in real time — no need to wait for a paper statement in the mail.

Just make sure you’ve turned on account alerts to track deposits, withdrawals, and other important account changes.

Banks cannot just assess fees at random. Federal law requires banks to disclose any fees they might charge for a bank account; before opening a bank account online or in person, ask to see a detailed fee structure. If you don’t think a debit memo on your bank statement is correct, contact customer service to address the issue.

In business, debit memos work a little differently. The company acting as the seller might issue a debit memo after sending an incorrect invoice. Doing so notifies the buying company that their accounts payable will increase to rectify the unpaid amount.

Recommended: How Long Does It Take to Open a Bank Account?

Real-Life Examples of a Debit Memorandum

Here are two real-life examples of bank memos, one for regular consumer checking accounts and one for a B2B transaction.

Banking Scenario

If you write a check to a friend but don’t have enough money in your checking account to cover it, the check will bounce when your friend goes to deposit or cash it. Every time you bounce a check, your bank will likely charge you a fee. Rather than sending you an invoice, they will directly debit the amount from your bank account.

Even if you have no money in your account, you can go into a negative balance. This debit will show up on your bank statement as a debit memo.

Business Scenario

In this example, your company has done construction work for a local business. However, when sending the invoice to the business, you accidentally left off the labor cost and additional materials required for one portion of the project, equivalent to $5,000.

To resolve this problem, you can issue a debit memo to the local business. This signals that you will be recording an increase in your accounts receivable of $5,000. In turn, the local business will then need to increase the amount in its accounts payable by $5,000 to cover the additional fee. To avoid delays or disputes, the debit note should include adequate information to explain the adjustment in the final cost.

Recommended: How to Transfer Money From One Bank to Another

Types of Debit Memos?

Three situations commonly call for debit memos: bank transactions, incremental billing, and internal offset. Here, learn about all three types of debit memos to understand their key differences.

Bank Transactions

As an individual consumer, you will most likely encounter a debit memo as a bank transaction. If you incur a fee through your bank, like for printing checks or an overdraft, the bank will debit your account directly to cover that fee. This will show up on your bank statement as a transaction, labeled as a debit memo or debit note.

Incremental Billing

If you are involved in billing for B2B transactions, you may encounter debit memos. A seller might issue a debit memo to a buyer for several reasons:

•   If there were errors on the original invoice.

•   If the buyer paid upfront, but project costs were higher than expected.

•   If the cost of materials or labor increased during the course of the project.

•   If the scope of the work changed and resulted in higher costs.

Internal Offset

If a customer’s account has a credit balance of insubstantial value, a company can issue a debit memo to clear out the balance. If the balance is large enough to be considered material (i.e., a significant amount of money), the company would typically refund the customer rather than issue a debit memo.

Debit vs. Credit Memorandum: What’s the Difference?

Credit memos are essentially the opposite of debit memos. In banking, credit memos alert customers of an increase in their account balance. In business, a seller might issue a credit balance to alert the buyer that the original invoice was too high, thus reducing the amount the buyer owes.

Notification to Customers

When a bank issues a debit memo, it typically notifies the customer of the debit on the bank statement. Similarly, a credit memo will show up on a customer’s bank statement.

As a customer, you may receive paper or electronic statements. If you bank online, you can typically check your transactions at any time on the app or website. When you receive notification of a debit, you’ll want to take it into account when balancing your bank account.

Invoicing

As a seller issuing a debit memo, you are notifying the buyer that you are increasing the final invoice amount. A credit memo does the opposite: It notifies the buyer that you are reducing the final invoice amount.

Recording the Reduction

In the event of a debit memo, the seller will record an increase in the accounts receivable amount; the buyer must record the larger debit in their accounts payable ledger. For a credit memo, the seller records a decrease in the accounts receivable amount while the buyer records a smaller debit from accounts payable.

Debit: Remit Payment vs. Credit: Future Purchases

To clarify a bit more, debits are amounts owed that must be remitted to settle and account. Credits are money that an individual or business is owed, perhaps reflecting an overpayment, which may be applied to future purchases.

Here’s a summary:

💡 Recommended: Credit vs Debit Memo

Managing a Bank Account

When you open a checking account or savings account, it’s important to understand the fee structure so that you aren’t surprised by a debit memo on your monthly account statement. Ask for a fee structure upon opening a new account, and monitor your statements closely to understand what fees are being assessed.

As best as you can, check your checking account for low balances, and set up alerts for all transactions. It can also be wise to activate fraud alerts to help manage your banking security and protection.

The Takeaway

Debit memorandums alert banking customers that funds will be withdrawn from their account, often to cover fees incurred. This will lower an account balance, so it’s important to be aware of these changes and make sure your account doesn’t go into overdraft.

Looking for the right banking partner? See what SoFi offers.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

Do you pay a debit memo?

A debit memo serves as a notification of a debit from your account. The bank will automatically debit your account. In a B2B scenario, a debit memo is a form or document that notifies the buyer that the seller has increased the accounts receivable amount.

Who issues a debit memo?

A bank or credit union may issue a debit memo to a personal or company account for specific fees, including bounced checks, insufficient funds, or printing checks. A business may issue a debit memo to another business to correct an invoice that results in underpayment. A business can also use a debit memorandum internally, to offset a credit balance in a customer account.

Is a debit memo the same as an invoice?

A debit memo is not the same as an invoice. Rather, businesses often issue debit memos as a correction to an initial invoice, typically when they have mistakenly undercharged a customer.

Photo credit: iStock/Vadym Pastukh
SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 11/12/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOBK-Q224-1929370-V1

Investors who trade using margin, or funds they’ve borrowed from their broker, do so via a margin account. The amount of money in that account is their margin equity, and their margin equity percentage is the portion of funds in that account that they own (versus funds they’ve borrowed).

It can be important for investors who use margin to understand both margin equity and margin percentage — and their importance when trading or investing with a margin brokerage account.

What Is Margin Equity?

Margin equity is the amount of money in a margin trading account at any given time. A margin account is a stock brokerage account that allows the account holder to borrow up to a specific amount of money from the brokerage firm.

Margin accounts can be a powerful investment tool for sophisticated investors comfortable with higher levels or risk because they have to put up less of their own money in order to make a trade.

Investors can use funds in a margin account to invest in more financial securities, such as stocks, bonds, or funds, that are paid for with funds that exist in the margin account. Money in a margin account is typically in either cash or securities.

Using the value of those assets, a margin account investor can borrow up to 50% of the amount of the cash needed to buy a stock or other security. The securities broker charges interest on any money borrowed in a margin account, plus a commission for executing the trade.

The goal for any margin account investor is to earn back enough profit from a margin account trade to cover the costs of interest on the borrowed margin account funds. If an investor loses money on a margin account trade using borrowed funds, they still have to repay those funds, with interest.

💡 Quick Tip: When you trade using a margin account, you’re using leverage — i.e. borrowed funds that increase your purchasing power. Remember that whatever you borrow you must repay, with interest.

Recommend: What Is Margin Trading and How Does It Work?

Margin Account Rules

The Financial Industry Regulatory Authority (FINRA) sets the minimum balance of a margin account at $2,000. And a brokerage firm may have its own maximum fund limits based on the ability of the investor to prove they can repay any money borrowed from the broker via a margin account.

Any time a margin buying investor wants to buy a new security and requires borrowed margin account funds to do so, the amount of cash the investor puts on the table is known as the margin requirement.

To determine an account’s margin equity, you’d first add up the cash amount borrowed from the brokerage firm and the value of “covered call” options the investor has sold. Any unleveraged assets (like cash or stocks) left in the margin account after the above assets are subtracted is margin equity.

What Is Margin Equity Percentage?

Margin equity percentage is the portion of unleveraged assets in the account. The process of calculating margin equity percentage is similar to using debt-to-equity ratios.
Here’s an example:

Let’s say the investor buys $10,000 in stocks and funds and has borrowed $5,000 in margin account funds from the broker. The value of that $10,000 investment has increased to $11,000, as the assets purchased have increased by $1,000. The margin loan hasn’t changed – it’s still $5,000. Thus, the investor margin equity in the account stands at $6,000.
If that original $10,000 investment had resulted in a $1,000 loss, the margin equity portion of the account stands at $4,000 ($5,000 – $1,000 = $4,000.)

In the example above, the equity margin percentage is represented by the investors margin equity divided by the value of the margin account.

Using the same figures in the example where the account grows by $1,000 ($10,000 + $1,000), $6,000 divided into $11,000 is 54.5%. Using the same figures where the account declines by $1,000, and the equity value of the margin account is $4,000 and divided by $9,000 (the total amount of money left in the margin account) the margin equity percentage is 44.4%.

💡 Quick Tip: When you’re actively investing in stocks, it’s important to ask what types of fees you might have to pay. For example, brokers may charge a flat fee for trading stocks, or require some commission for every trade. Taking the time to manage investment costs can be beneficial over the long term.

The Importance of Knowing Your Margin Equity and Margin Equity Percentage

Knowing your margin equity and margin equity percentage can help you understand the level of risk that you’re taking in the account. That can help you determine whether you might need to make changes in order to boost your maintenance margin, or the minimum account balance needed to avoid a “margin call.”

Brokerage firms issue margin calls if an investor’s funds fall below the required maintenance margin. If you can’t meet a margin call, the brokerage firm can shut down your margin account and hold you personally responsible for any losses incurred in the account (and charge you additional fees and commissions, as well.)

The Takeaway

As discussed, the existing balance in a margin account is their margin equity, and their margin equity percentage is the portion of funds in that account that they own (versus funds they’ve borrowed).

Investors who choose to trade on margin should keep an eye on their margin equity and margin equity percentage as one metric on measuring the performance and investment risk of that account. A margin account with a higher equity percentage has lower levels of debt, making a margin call less likely.

If you’re an experienced trader and have the risk tolerance to try out trading on margin, consider enabling a SoFi margin account. With a SoFi margin account, experienced investors can take advantage of more investment opportunities, and potentially increase returns. That said, margin trading is a high-risk endeavor, and using margin loans can amplify losses as well as gains.

Photo credit: iStock/Remitski