Gift card balance

Gift cards cannot be used to purchase gift cards. The Microsoft account balance is essentially the same as a gift card since funds typically come from Xbox gift cards.

Microsoft gift cards and Xbox gift cards are essentially the same thing. They both add funds to your Microsoft account balance. So if the game allows you to use your Microsoft account balance on the purchase, then either gift card will work.

You can't buy a gift card with funds in your Microsoft account balance. That would be essentially buying a gift card with a gift card. You would need to buy a game or other content in the store and use your account balance as the payment method.

If you redeemed your rewards points for a Microsoft gift card or Xbox gift card, the balance should automatically be added to the account balance for the account that redeemed the points. They don't send you a code typically.

It's true. You can't use funds from a gift card (which is what the Microsoft account balance is) to purchase a gift card.