I believe I ran into a bug with iTunes.

A few weeks ago, the credit card I was using on iTunes was replaced. As soon as I got the new replacement, I updated my iTunes account with the new card. Starting then, I wasn’t able to make purchases or update my existing iPhone apps. I’d get the error msg “The iTunes Store is unable to process purchases at this time” each time on my home PC, work PC and my iPhone itself. So it’s clear, it’s a server bug not client. I roamed the forums but didn’t see anything helpful.

The workaround? I create a new iTunes account and now I can make purchases & updates finally.