MS account balance used for payment doesn't show up anymore when purchasing

My son received $50 in Xbox gift cards and we redeemed them and they are showing up in our account but they are grayed out via the console. When we go to purchase a game, the MS card balance doesn't show as payment option. Any ideas what the issue might
be?

When you're making a purchase, make sure it shows that you are using your Microsoft account balance as your payment method. That is the currency on your account.

That is the problem, I cannot find the bit showing my balance, therefore, doesn't that mean it has not been added to my account

It does not show up in my order history, but when I look up the account balance the amount does include the gift card was added. When I go to purchase a game to use the money in the account balance it doesn't show the new gift card amount.

When you make a purchase, on the console or the website, it clearly shows you which payment method you're using before you confirm the payment. You would need to make sure it shows your Microsoft account balance as your payment method before you confirm
the payment. You would need to make a purchase on the console in order to use your account balance.

If you look at your order history on your account by signing in at account.microsoft.com it will show you:

1. The status of the purchase it will say refunded or completed if it shows refunded then MS has sent the refund info to your bank if it still shows as completed then that means it was never refunded.

2. If it shows as refunded it will also show you what payment option was used to make the purchase whether it is credit/debit card (last four digits), PayPal, MS account currency/gift card. With Credit debit cards this normally take 3-5 days for MS to process
and send it to your bank then it would be up to your bank and their processing to put it back into your account. PayPal will normally just put it back into your PayPal balance and you would need to then request them to send it back to your bank they can take
up to 30 days just to show it into your PayPal balance. MS account currency balance/Gift card would show back in that available balance immediately.

So with all that being said the first thing you would need to do is to check your order history to make sure the refund went through.

If it did go through check to see what payment option was used to make the purchase and since it did go through it would be out of MS's hands at this point and up to you to contact your bank to figure out where your money is at.