Quite simply, call your bank and tell them to ignore ANY Direct Debit's from Microsoft and Xbox Live! (your bank cannot refuse this request!!!).
Microsoft will soon remove the card details when they get charged for EVERY attempt to withdraw money from your account. DO NOT tell MS that you have had the bank deny the DD and MS lose out. Here in the UK MS will be charged by the bank £35/$70 for EVERY attempt.
The ONLY thing you tell MS is that you no longer have a Credit Card and will be using prepaid cards and threaten them with Statutory Rights (or equivelent if not from UK). Refusal to remove the card is a breach of the Data Protection Act 1998(a)(UK ONLY), The Banking Code (UK) and the Credit Services guidelines (UK). Refusing to allow a change of payment method is against your Statutory Rights (UK).
As for poor customer service, make sure you get a name at the VERY beginning of the call. If they say 'NO' you say 'Supervisor'.
Ms can only get away with this because that are a massive company so, why not just tell your bank and make MS pay?. If everyone learned this MS would go under overnight.