This blog on Consumerist caught my eye because I’ve experienced the very same thing. My credit card expired while I was living in Japan, and I let it go as I wouldn’t be using Xbox Live there anyway. I came home months later to find that Microsoft was still somehow charging me on a dead card. I called my bank and asked how they could do that? They weren’t sure.
Consumerist calls it zombie billing. When an account you thought was dead is suddenly re-animated, and you get charged automatically from auto-billing, that’s zombie billing.
The banks don’t know how Microsoft can do that because they can’t. It’s called fraud. It’s illegal.