My nephews live is up on the 14th so I just got him a 25 quid code to cover the 23.99 offer they have on after I try to purchase it keeps asking me how to pay the rest as the second year will be 39.99. However my nephew has no linked PayPal or bank cards as we would obviously turn off auto renew on the second year.
Put his parents card or paypal on the account, then once the £23.99 live is active, immediately remove auto renew and then remove the paypal/card from the Microsoft account.
I might be wrong, but for some reason something is making me think that an Xbox Gift Card balance can not be used to pay for an Xbox Live Gold subscription.
As I say, I could be wrong, it's just that was my initial gut reaction to your post.