Microsoft announced at E3 last month that they would be getting rid of its Microsoft Points currency system and using real money for transactions for now on. Today, Microsoft announced that Xbox Live Rewards will be doing the same thing, although it's not yet determined how the new Rewards system will work now that it won't be using Microsoft Points.
Starting on August 1, Xbox gamers will no longer be able to earn Microsoft Points through Xbox Live Rewards, but Microsoft says that "you'll continue to be rewarded for doing the things you love on Xbox Live." The company hasn't yet announced what they'll be using on Xbox Live Rewards, but they say that they'll be revealing the new system on September 1.
Furthermore, Microsoft will deposit all of your pending Rewards points into your account on August 7. If you also happen to have Microsoft Points in your Xbox account when Points are retired, they'll be transitioned to real-money currency, and you'll be able to use them as normal, such as buying digital games and items.
Microsoft announced the demise of Microsoft Points during E3 last month ahead of the Xbox One's launch later in November. We still have yet to hear an exact date for the switchover, but today's Xbox Live Rewards announcement provides some hints as for when we might see the official switchover.
Microsoft Points have been the main form of currency in Xbox Live for ages, and gamers were able to buy them using a credit card, or purchasing them physically at retail stores. The ousting of Microsoft Points looks to eliminate a step in that process by switching to real money, making the process easier for gamers to buy stuff on Xbox Live.
SOURCE: Xbox Live Rewards