What is a 'Scrip'

A scrip is one of several things but is primarily known as a document acknowledging debt. Companies short on cash often pay scrip dividends instead of cash dividends. A scrip is also a temporary document representing fractional shares resulting from a split or spin-off. Scrip can also indicate currency issued by a private corporation, such as frequent flier miles.

BREAKING DOWN 'Scrip'

The term scrip, in a broad sense, indicates any type of substitutional currency that takes the place of legal tender. In many instances, scrip is a form of credit but is generally always some form of documentation of debt.

Why Scrip Was Created

Scrips were created as a means of payment, or compensation, to employees under the truck system. This system simply means employees are paid with commodities, vouchers, tokens or some other indication of credit instead of cash.

Scrip has also been widely used in localized commerce during periods of time when traditional, or legal, currency is unavailable or in short supply. This includes in small communities or towns, such as the first coal towns, in remote locations, military bases, ships at sea for long periods of time and in occupied countries during wartime.

Types of Scrip

Scrip may take on many forms. In certain companies, scrip may take on the form of rewards points or coupons. Other forms for scrip include land scrip; token coins, such as those used on subways; vouchers; IOUs; and tokens and tickets used at an arcade or game center. Even points on certain credit cards may be considered scrip.

The Retail Industry

Arguably the most widely visible and most modern form of scrip is utilized in the retail industry in the form of gift cards or paper gift certificates. The advantage to such scrip is often in terms of acceptability, as it can sometimes be deemed improper to give physical cash but acceptable to give a gift card as a present. Gift cards also allow the user to somewhat control what and where the "gift" is spent as gift cards cannot be used in all locations. Gift cards or certificates for certain stores or restaurants further restrict the recipient's spending.

Fundraising

Scrip evolved, in the 1980s, to include a now popular method of fundraising. This fundraising option is specifically popular among bands, athletic groups, schools and other nonprofit organizations. So-named scrip fundraising begins with retailers of all kinds providing such nonprofit organizations with gift cards and certificates at a discounted price. The organizations are then able to turn around and sell the scrip to family, friends and their local community at full face value. The discount the organization receives is retained as revenue or funds raised.

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