as seen, it’s like smallest instance. These days 500MB of RAM is a bit too little for normal day to day operation. 512-463=49 MB which are reserved/used by loaded kernel, so you have less 463 available for the rest. From that, software running on the system like systemd, cron etc. they all need some minimal amounts of RAM as well.
When installing package upgrade, DNF can run some post scripts etc. which can kick instance over the edge.
My suggestion is turning on SWAP file of 1GB or so, this should be enough.
Not sure what the workload of the instance is, but if it needs to be performant , and goes over 512MB of usage constantly, then yes, larger instance would be better. For simple machine which serves as a jump-box or whatever, swap should do the job.