trouble paying Xbox Game Pass Ultimate with Microsoft account balance

you must have a backup payment option, the balance will be charged from your microsoft account, but the backup option is required, it can be paypal, credit card or debit

Untrue. As Smwutches already indicated, past due balance can not be paid for with Microsoft balance

Overdue balances can only be paid with a credit card or Paypal.

here is a link to all the info on past due balances and how to pay them.

https://support.xbox.com/en-US/billing/xbox-subscriptions/pay-past-due-balance-on-xbox-subscription

depending on when it was set to renew, you may be able to pay the balance and then request a refund, or, if the past due subscription is for Live Gold and you wanted to take advantage of the deals on Game Pass,
Ultimate you can simply pay the outstanding balance and then upgrade to Game Pass Ultimate and any time left on your Live Gold will also be converted to Game Pass Ultimate

Hello chrissy2509,

Thanks for posting on the Xbox forums. We understand that you are interested in paying your past-due balance for your Xbox Game Pass Ultimate subscription with your Microsoft currency instead of a debit/credit card. We have a support article that explains
how to use your
Microsoft account balance to pay a past-due subscription. Be sure to let us know the results!