Is something amiss with the XBL billing system? I am trying to put a new XBL account on my xbox and am trying to pay with the same debit card that I used on my old account, but keep getting this error when it comes time to purchase.
Have you tried adding the membership to the account on xbox.com as well as on your console?.
Might be worth a shot OP.
But if you continue to get the error it might be a good idea to phone support for your region on Monday morning.
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Also make sure all your payment method information matches that of your Xbox LIVE account (name, address, etc).