What is Scrip?

A scrip is a sort of proxy currency, used in the place of actual legal tender as a way of representing money. Often, this currency is purchased with legal tender, although it can very rarely be redeemed for money again. It can be spent in specialized venues. Since it is not legal tender, there is no implicit legal guarantee that it will be accepted for its cash value, although most contemporary scrip includes some sort of guarantee.

Historically, scrip was often used by companies as a way of paying their employees in a currency they could only spend at company stores. Loggers and miners, for example, were often paid partially or wholly in a company scrip, with which they could then buy food, supplies, and miscellaneous sundries at the local company store. This allowed the companies to charge whatever rates they wanted for their products, effectively removing any competition or choice from their employees. Most companies allowed their employees to cash in their scrip for actual legal tender, but usually only at a significant loss.

The most common form of modern scrip is the gift card or gift certificate. A customer trades in his or her cash for store-credit in the form of a physical certificate or card. These cards and certificates can be given as a gift to someone else, who can only spend the money at the store in question. Gift certificates were an amazing innovation for modern stores, as they effectively cost the store nothing and more-or-less force the recipients of the gifts to spend money at their store — or not to spend the certificate at all, in which case the store makes a profit without having to provide a good or service.

Airline miles are another good example of a highly-specialized modern scrip. Airlines give miles as an incentive when customers fly with their airline. Airline miles may be cashed in for tickets or upgrades on the issuing airline or on partner airlines. Other companies, as well, can offer airline miles to encourage people to use their products. Hotels, car rentals, credit cards, magazine companies, and any number of other businesses make frequent use of airline miles as scrip to give people a direct reward for choosing them over a competitor.

Tokens and tickets are other forms of scrip, both of which have been in use for some time. In arcades and carnivals, money is traded in for some sort of token or ticket, which can only be used in the arcade or carnival and usually cannot be converted back to cash. This has the benefit of encouraging people to overspend — they tend to purchase large amounts of scrip to save themselves return trips, and either do not use it all or use it when they otherwise wouldn’t have, simply to get rid of it. It also allows all cash-transactions to be handled at one location, rather than requiring individual vendors to take money and make change. In the case of some arcades, a multi-level system is in effect — money is converted into tokens, which are then used on games that dispense tickets depending on the player's success, which can be used to purchase toys and other prizes.