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Last year, one of our credit card companies prevented a thief from using our account to buy gas in Utah.

Another prevented me, at least temporarily, from buying a computer.

Distinguishing between fraudulent and legitimate transactions is a complicated, expensive business for credit- and debit-card issuers. Banks suck up and analyze reams of data about your shopping habits so they can guess when a transaction might be fraudulent. Many times, they guess wrong.

A fraud-detection system might flag 20 legitimate transactions for every bogus transaction it uncovers, said Avivah Litan, a vice president at Gartner Research. Banks have to decide how many of these "false positives" deserve further scrutiny, by humans, and how many should automatically trigger account suspensions.

Erring on the side of too much human review can boost issuers' costs. Erring on the side of shutting off cards can irk customers.

Image: Liz Weston

Liz Weston

"They walk a fine line between inconveniencing people and protecting themselves," Litan said.

And make no mistake: The banks are protecting themselves, not you, when they abruptly suspend your account. Federal laws limit your liability for fraudulent transactions on either your credit or debit cards. Issuers typically waive that liability completely, meaning you're not on the hook for any fraud as long as you report it promptly.

How banks detect fraud

But fraud is big business. Research firm Aite Group estimated the annual U.S. tab for payment card fraud at $8.6 billion. While merchants swallow some fraud costs, particularly for "card not present" transactions over the phone or Internet, card issuers pay for most of them -- and that gives them a good incentive to try to limit losses.

To do that, banks started using "neural network" computer systems in the 1990s to combat a big leap in credit card fraud. The systems used complex statistical modeling techniques to analyze transactions for signs of fraud.

The fraud-detection programs are "self-learning," which means they teach themselves over time which behaviors and situations are normal for you and which aren't, using as much information as card issuers are willing to feed them. And so over time, the card issuers build up an impressive database of information about how and when and where you shop, the better to analyze whether your latest transactions fit your usual pattern.

If this feels a little creepy, well, maybe it should. In George Orwell's classic novel "1984," Big Brother was the dictator who kept everyone under government surveillance at all times. In the real world, you're under constant surveillance by your card issuers.

If you're a new customer and the software doesn't have much information to work with, it can use "peer profiling" -- comparing your transactions with those made by people of similar age and income in your ZIP code.

The card issuers also can impose certain rules on the software, such as flagging small transactions followed by big ones -- bad guys often test a stolen account before using to buy something more expensive -- or putting the brakes on transactions coming from a certain location. If there's a sudden surge in card fraud from Eastern Europe, for example, the software can be instructed to automatically halt any transactions coming from there.

And speaking of geography, fraud-detection models tend to balk if it looks as if you're in two places at once. If you sign into your bank account from your home computer in California and minutes later someone uses your bank-issued card to shop in Mexico, the card account is likely to be suspended, Litan said. If the person in Mexico is a bad guy, you might be happy to be spared the hassle of reporting the fraud. If it's your kid using an authorized card on spring break, you -- and she -- might be less than thrilled.

How to avoid problems

Card issuers are constantly tweaking their systems, so it's tough to know what behavior is likely to trip their fraud alarms. Here are some ways to reduce the chances you'll get stranded without working plastic:

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  • Have access to more than one card. If your card is declined because the issuer suspects fraud, you typically can get the suspension lifted with a phone call. Sometimes it takes longer to clear the jam, though, so you may want to present another card and then deal with getting the first card working again.
  • Make sure your issuer has up-to-date contact information. The more ways your card company can notify you of a problem, the quicker you may be able to deal with it -- reducing your chances of being embarrassed or inconvenienced by having your card declined. In addition to providing home, work and cell numbers, consider enabling text messages and email alerts.
  • Update your address when you move. Making sure your issuer has your new address will help prevent you from missing a paper statement, but it may also keep routine transactions from being denied simply because they're emanating from a new ZIP code. Still, expect more scrutiny when your address changes. Bad guys who take over existing accounts typically change the address and then rack up big charges or take out cash advances, so doing either could increase the chances of your account being blocked.
  • Let your issuer know about big purchases and travel. It used to be that only international travel would set off fraud alerts, but now any purchase away from your home base can raise red flags. The same is true of big purchases, particularly of easily fenced items such as electronics or computers. (I made the mistake of using a new credit card for last year's computer purchase without calling in advance.) But also understand that advance warning to the issuer doesn't guarantee your account won't be suspended, so make sure to bring that back-up card.
  • Treat fraud alerts with caution. If you get an email or phone call saying your card has been suspended because of suspicious activity, don't assume the message is coming from your issuer. Fraudsters have learned that bogus alerts are a great way to con people into giving up their account information. Rather than clicking on a link or using the phone number provided, dial the contact number printed on the back of your card to reach your issuer.

Liz Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "The 10 Commandments of Money: Survive and Thrive in the New Economy" (find it on Bing). Weston's award-winning columns appear every Monday and Thursday, exclusively on MSN Money. Join the conversation and send in your financial questions on Liz Weston's Facebook fan page.