Looks like iTunes 10 has been giving a tough time to some users out there. A number of users on the Apple forum have been complaining that their credit card billing is being declined by iTunes ever since the new update was released. Apparently, these credit cards are declined from payment processing despite users entering their correct billing addresses apart from holding sufficient balance in their accounts.
While there is no official word from Apple in this regard, one user has noted that the issue pertains to foreign IP addresses (presumably non-US). The Apple engineers are reportedly working on this issue and an update is expected this week – before September 17.
The bug also poses a problem when you want to download a free app but in any case you don’t want to hold on until the update is released, you can unpair your credit card from iTunes billing by selecting “no card“. This should help you download free apps at least for the time being. Or else, you can also downgrade from iTunes 10 using the tutorial here.