Microsoft has announced that Microsoft Points will officially be dropped in the next Xbox 360 firmware update, and replaced by real world local currency. Xbox money cards will also be available in stores as well.
”Don’t worry about your Microsoft Points Cards either,” Microsoft reassures, ”We’ll continue to accept purchased Microsoft Points Cards and codes until further notice, and we’ll add to your account an amount of local currency equal to or greater than the Marketplace value of those points. In addition, we know you’ve worked hard on your Microsoft Points earned through Xbox Live Rewards. These will remain in your Xbox Live account and transition to local currency with the rest of your Microsoft Points.”
The next update will probably be in the Fall, as part of the Xbox Live Fall Update, as usual.

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