The Mastercard I kept on file on Xbox Live is no longer valid due to some fraudulent activity. This was not an issue because I did not need to buy any Arcade games or DLC. In addition, my Live subscription was valid until August 2012. So, imagine my surprise when Microsoft started spamming nearly daily saying there was a problem with my account. I ignored it after checking that I did not owe them anything and that my Live account was still active and paid for.
Yesterday, I guess they decided they were not satisfied so they cut off my Live account. To fix it, I had to jump through some hoops, three or four different webpages. I had to add a new card (which took a few tries before they accepted it), before I could remove the invalid one.
Why does Microsoft care if I have a (valid) card on file? So they can auto-charge me when they feel like it? It’s a terrible policy. If your customer doesn’t have a card on file, then he can’t buy products and services. It’s his problem. It’s his prerogative.
Update: I tweeted the question to @XboxSupport and they said that for recurring subscriptions they require a valid credit card on file, even if the recurring charge isn’t going to happen for a long time.