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Scrip is a type of currency used in place of legal tender, often purchased with legal tender but rarely redeemable for it. It can be spent in specialized places and historically was used to pay employees at company stores. Modern examples include gift cards, airline miles, tokens, and tickets.
A scrip is a kind of representational currency, used in place of actual legal tender as a way of representing money. Often this currency is purchased with legal tender, although it can rarely be redeemed for money again. It can be spent in specialized places. Since it is not legal tender, there is no implied statutory guarantee that it will be accepted for its cash value, although most contemporary scrip include some form of guarantee.
Historically, companies used scrip as a way to pay their employees in a currency that they could only spend at company stores. Loggers and miners, for example, were often paid partially or fully in a company scrip, with which they could then purchase food, supplies, and sundries at the local company store. This allowed 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 their scrip for actual legal tender, but usually only at significant loss.
The most common form of modern scrip is the gift card or gift certificate. A customer exchanges his cash for store credit in the form of a physical certificate or card. These cards and certificates can be given to another person, who can only spend the money in 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 gift recipients to spend money in your store, or not spend the certificate at all, on 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 award miles as an incentive when customers fly with their airline. Airline miles can be redeemed for tickets or upgrades on the issuing airline or on partner airlines. Other companies may also 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 a scrip to give people a direct reward for choosing them over a competitor.
Tokens and tickets are other forms of scrip, which have been in use for some time. At arcades and carnivals, money is redeemed for some type of token or ticket, which can only be used at the arcade or carnival and typically cannot be converted back to cash. This has the benefit of encouraging people to overspend: they tend to buy large amounts of scrip to save on return trips, and either don’t use it all, or use it when they otherwise wouldn’t, simply to get rid of it. . It also allows all cash transactions to be handled in one place, rather than requiring individual vendors to take money and make change. In the case of some arcades, a multi-tier system is in effect: money is converted into tokens, which are then used in games that dispense tickets depending on the player’s success, which can be used to purchase toys and other prizes.
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