MajorNelson made a post a few days ago on how you can turn off automatic renewal of your Xbox Live Gamertag. This saves you so much time since you will not have to call Microsoft/Xbox Live Support. So forget canceling, turn this off and what will happen is that your Gamertag will just turn into a Silver membership instead of Gold.

Sign into Xbox.com and click “My Account Section” then from there click the “Membership Level link“. You will then see text saying “Automatic Renewal: ON”. Now click the “ON” link and it will bring you to a page where you can turn it OFF. Select off and click next to finish the process. If you would like to turn them back on, just click the OFF link and go through the process again.

My suggestion? Just pay for the yearly membership no matter what you are doing. Unless you are using cards or cards from others there then sure, turn off automatic renewal so it does not charge your card. Otherwise, to those paying monthly fees, even if you barely game, in the long run you save. But hey, do what you want in the end, not my money.

Source: MajorNelson.com