How to purchase Xbox Gold with MS account credit?

It's not possible to purchase gold with currency on your account. Gold can only be purchased via credit card/Paypal or by purchasing a prepaid card in a store.

If you purchase and apply an Xbox Live Gold card to your account
before your renewal date, MS will accept that at time of renewal over a credit card on file with your account and the credit card will not be charged.

To be clear, there are two kinds of Xbox cards: Xbox Gold and then standard Xbox gift cards. For a card to be used toward your Gold membership, the card must say
Xbox Live Gold (they come in 3, 6, and 12 month amounts). A standard Xbox gift card which is used for the purchase of games or content will not be accepted/used toward an XBL Gold membership renewal.

I'm a little confused when you say that your membership recently renewed but the charge isn't until next week. MS typically charges on the exact date of renewal. If there was no Xbox Gold card applied to your account on the date of renewal, it is possible
that the credit card has been charged on the date of your renewal and the charge just has not yet shown up on the credit card statement.

It's not a glitch. It's how the system works. Gold can only be purchased via credit card/Paypal or by purchasing a prepaid card in a store. It is not possible to purchase gold with the currency in your account.

No that's not possible. The MS currency is used to purchase dlc media like games or movies but you will need a valid method of payment, such as a credit card, linked to your account to purchase xbox live membership. Otherwise you can purchase prepaid gold
membership from third party retailers.

An workaround that has worked for me (and suggested by MS), is to create a second account and purchase from that account. Funnily enough, I used the same credit card and it works fine!! However, this is not a solution and I don't know what will happen when
MS tries to renew my Gold subscription.