If you're on the Xbox 360 Entertainment For All Plan (formerly “2 Year Xbox Live Gold Contract”), your account must be associated with a credit card. Pre-paid cards and PayPal are not valid payment options for this subscription. You can change your payment to another credit card, but if you don't have a credit card associated with your account and it is before the end of the two years, you are effectively canceling the subscription and will be charged an Early Termination Fee and any applicable taxes.
Remove, add, or switch payment options for your Xbox Live or Zune account by using Xbox.com
You can remove, add, or switch payment options for your Xbox Live account or Zune account on Xbox.com. Here's how.
You can't remove a payment option (credit card) that's currently associated with an active Xbox Live membership. If you try to do so, you'll be prompted to add a new payment option for your membership.
Repeat the first three steps in the "To remove a payment option" procedure, above.
Next to the payment option you want to use, click Apply to Membership.
Now that you’ve switched your membership to another payment method, you can remove the original payment method. To do this:
Click Manage Payment Options.
Next to the payment option you want to remove, click Remove.
Click Yes to confirm the removal.
Remove a payment option from your Xbox Live account by using your Xbox 360 console
On your Xbox 360 console, sign in using your Xbox Live gamertag.
Go to settings and then Account.
Select Manage Payment Options.
Select Remove Payment Option.
Select the payment option you want to remove.
If you don’t want to add another payment method, you can turn off auto-renewal or contact Xbox Support for help removing your payment method. If you contact Xbox Support, have your gamertag and payment information available.