Since Iceland is in the EU, you should check a bit more if that's allowed. I'm pretty sure it isn't and when the credit expires you should still be able to collect the original amount, at least that is what happened in some other instances to avoid liquidity crisis with airlines and holiday agencies.
Iceland, like Norway where I'm from, is part of the European Economic Area[1] through the European Free Trade Association[2], but not a full EU-member. They get access to the EU single market, by agreeing to implement EU legislation in a number of areas.
It can be quite confusing at times. For example, both Iceland and Norway are part of the Schengen agreement[3], so in that respect we're "from EU" when traveling.
Iceland is not in the EU. They are in the process of joining since like a decade but have never completed their application. They are in the EFTA and the EEA however.
According to an Icelandic friend not fully joining the EU is on purpose. There are people on Iceland that enjoys the benefits of EFTA and EEA, yet does not want to fully tackle corruption. Iceland is the most corrupt Nordic country by far (yet on a global scale still pretty good).
Well yes and no, the topmost reason is that rural folk simply are very eurosceptic there (see polls on that matter) and the election system favors them a bit, so overall, the eurosceptic parties remain in power (for now). Though I've yet to see an analysis on the matter since Russia's imperialistic invasion of Ukraine.
