I am not able to select my Microsoft account balance (I have $20) to make the transaction. The only options allowed to me are to add a card/Paypal. After I added one, I still could not switch the payment option. I can't switch to my balance at all with any game purchase attempt.
Here is a screenshot: https://dl.dropboxusercontent.com/u/6040452/Public%20Images/nomsp.png
I am able to make purchases with Paypal (just purchased Tales of Vesperia). I want to use my balance though, as it expires in 2015. Never had a problem before back when MSP was still around.