Cash Is Burden to Hungary’s Consumers : East Europe: A poor phone system and inflation prevent the use of credit cards or checks. Stacks of money must be used to make purchases.

When Istvan Nagy traveled to Budapest to buy appliances and furniture for his new home, he could have been mistaken for the Michelin tire man.

The dentist from Szombathely outfitted himself for shopping with a multichambered Windbreaker under his trench coat. In each of its half-dozen pockets, he had zipped a precounted pile of Hungary’s largest bank notes, the mint-green 1,000 forint bills, each worth about $14.

“There ought to be a more convenient way of doing this,” Nagy grumbled as he sidled to a register at the Ikea discount home furnishings store and began disgorging wads of money from the bulging coffers over his rib cage.

Other Hungarians prefer rucksacks or plastic bags for toting their personal wealth, hoping to elude the notice of muggers and pickpockets who stalk banks and shopping streets in search of easy prey.

Despite an explosion of consumerism, Hungary remains locked in a cash-and-carry time warp. Conveniences such as checkbooks and credit cards are still virtually unknown. Workers are paid in cash and usually take it home to stash in socks or mattresses rather than to a bank, where it can be held hostage to bureaucracy and eroded by inflation. Bills are settled in person; even cars and houses are often paid for in cash.

Banking and credit executives say three things must happen before they can ease the plight of the Hungarian consumer:

* The forint must be fully convertible, which is projected for 1993.

* Inflation must be tamed to a single digit, which is expected later this decade.

* A dependable telephone system must be in operation, a date for which no responsible official will offer a prediction.

“Our payment system has a lot of critics, and rightfully so,” said Eva Vasas, general manager of payment systems at the National Bank of Hungary. “If the Hungarian forint were convertible, these problems would cease. But for now, paying for anything is a very hectic experience.”

The lack of convertibility prevents the average Hungarian wage-earner from obtaining an international credit card, such as Visa or American Express, although those cards are readily accepted from foreigners at thousands of shops and restaurants.

Inflation and a hopelessly antiquated telephone network have torpedoed the national bank’s efforts to introduce cashless instruments for domestic transactions.

Merchants are reluctant to accept checks or debit cards when inflation is galloping along at nearly 40%, Vasas explained. By the time funds are actually transferred from the buyer’s account to that of the seller, weeks have passed and the money has lost some of its value.

The National Bank of Hungary recently offered customers debit cards, but Vasas said so few merchants agreed to accept them that the system has effectively failed.

A handful of large department stores have experimented with cashless payments but foundered on the notorious telephone system.

“We were trying to work out a guaranteed-check system where a merchant could call in to a central computer bank to check the status of an account,” Vasas said. “But how does that work in a country where you often can’t even get a dial tone?”

The result is a nation of 10 million frustrated consumers, forced to steel themselves for each purchase as if for battle.

Bela Hanko recounted how he recently withdrew from the savings bank 950,000 forints--about four years’ wages for the average person--to pay for his new blue Mitsubishi. He bundled the 950 1,000-forint notes into a block the thickness of three bricks. He carried it in a plastic bag in his shirt.

“Fortunately, it’s only a few hundred meters from the bank to the car lot. But I had to walk by a gas station that had just been robbed,” recalled Hanko, a 35-year-old painter describing the ordeal as if it had been a brush with death. “I’ve traveled to the West, and I know there are more practical ways of transferring money.”

The difficulties of a cash-based economy have made themselves more pronounced over the past few years. In most socialist countries, money was of relative value during the years when there was precious little in the stores to spend it on. But consumerism is flourishing now in Hungary, where neo-capitalist concerns are at the cutting edge in the former East Bloc and where many adults work two or three jobs so they can enjoy the newfound plenty.

And with incomes and prices on the rise simultaneously, criminals have also been induced to work overtime. Armed robberies more than doubled in the country last year, according to police, who say the muggers’ take was nearly $150 million.

“Two or three years ago, we didn’t worry about such things, but now there is so much crime,” Nagy observed while shopping at the Ikea store with the equivalent of $6,000 in his pockets.