A 14-year-old orphan named Richard Hunter, known to all as Ragged Dick, works for his living on the streets of New York. He shines and polishes the shoes of people who pass by. But despite his honesty, initiative and hard work, he almost always sits without a penny in his pocket because he habitually spends his earnings as soon as he gets them. Dick therefore gladly accepts invitation of a rich merchant Mr. Whitney to arrange a tour around the city for his nephew, a young man named Frank. Frank and his uncle give Dick some of Frank’s cast-off clothing, which make him look much more affluent. Dick likes the look, and he likes the way that people treat him differently. Accordingly, he develops a desire to improve his life and his financial position.
During the tour, the reader learns a lot of intriguing facts about New York streets and permanent residents - petty thieves, thimble riggers and other crooks. Impressed with Dick’s natural intelligence and uncommon wit, Frank advises him to go to school, but the penniless Dick cannot afford it. Instead, inspired by Frank’s suggestion, Dick begins to take lessons from his friend Henry Fosdick, who once attended school but who was forced out into the street after the death of his parents. Dick pays Henry by sharing his lodging and by inviting Henry to become a business partner. Together, the boys propose to better themselves. Dick gives up smoking and attempts to learn new habits.
At first, Dick and Frank work hard with little reward. They put in 18 hours a day and have frequent clashes with street thugs, the most desperate of whom is the notorious but unintelligent thick Mickey Maguire. Eventually Frank succeeds in finding a job in a hat shop through the intervention of Mr. Grayson, one of Dick’s mentors who teaches at the local Sunday school.
Whenever possible, Dick strives to learn the habits of the middle class. He attends church, opens a bank account, and reads regularly in the evenings. In this, he is often advised by his employer and other benevolent men. However, not all the people in Dick’s surroundings wish him well. Mickey Maguire is a constant irritation, and an itinerant boarder steals Dick’s bankbook and is caught.
Throughout the story, Dick is willing to help people less fortunate than himself. He lends or gives money freely to other bootblacks, and he sacrifices some of his own earnings in order to buy Frank the suit of clothes he needs to obtain employment. But in Horatio Alger’s novels, fate favors modest and hardworking members of American society. Dick soon has a chance to make a choice that changes the course of his life.
Going by a ferry to Brooklyn, Dick and Henry witness a dreadful accident: a little boy falls overboard. His father, who cannot swim, spontaneously offers a huge reward for saving his son. Dick, who happens to be an outstanding swimmer, leaps into the water and saves the boy. The boy turns out to be the son of James Rockwell, a famous industrialist and financier. James Rockwell hires Dick, who now starts to be called by his real name which is Richard Hunter, as a clerk in his New York office. This clears up Dick’s financial problems for the moment.
Returning once to his old room, young clerk discovers that his perpetual enemy Mickey Maguire has stolen the ragged clothing Dick once wore when he shined shoes. Dick does not particularly mind, since he understands that his old life is over forever.