If you’re a new credit card user or trying to rebuild your credit, qualifying for traditional credit cards can be difficult. Fortunately, you can build a positive credit history through timely repayment and by demonstrating wise credit usage with a secured credit card.

The Navy Federal secured credit card, also known as the nRewards® Secured credit card, is a good option for members because it has no annual fees, low annual percentage rate (APR), and comes with rewards that are usually not seen with other secured cards. With good credit management, you can upgrade to other Navy Federal Credit Union credit cards after six months.

What Is a Secured Credit Card?

A secured credit card is backed by a cash deposit. Your deposit is the collateral for the card, providing the credit card issuer with security if you don’t make payments. The amount of deposit you provide will be your credit limit.

Secured credit cards are usually issued to those with poor credit or borrowers with thin credit files. Your activity on these cards is reported to the credit reporting agencies so they can help you improve your credit score over time.

How Do Secured Credit Cards Work?

Secured credit cards work like any other card when it comes to making purchases. However, these cards are specifically designed for those with limited credit history or low credit scores.

You’ll need to put down a deposit, which will be held by the lender, to get a secured credit card. Your credit limit is determined by your deposit. For example, if you put down a deposit of $500, your credit limit will be $500.

You can charge purchases on your card and make payments before the due date to improve your creditworthiness and increase your credit score. Once your credit score is high enough to qualify for an unsecured credit card, you can either upgrade to one or cancel your secured credit card to get your deposit back and apply for a new unsecured card.

The Navy Federal secured credit card, nRewards, requires a minimum deposit of $200 to qualify. This amount will be the collateral for the card. You can deposit the amount in your savings account to get the card if you're a Navy Federal Credit Union (NFCU) member. The amount will continue to earn interest at the regular rate in the account while it is held as collateral.

After three months, you may be eligible to get additional credit without an additional deposit. Once you’ve held the card for six months, Navy Federal will review your account to determine if you’re eligible to have the hold removed and upgrade to an unsecured credit card.

Key Features

The Navy Federal secured credit card is a good option for building credit. An added benefit is that the card offers a host of perks and benefits that are not available with even some of the best secured credit cards.  

“If you're trying to build credit at a reasonable APR, Navy Fed is a good option for military,” encourages Teresa Dodson, a financial expert and the founder of Greenbacks Consulting. “The card has a lot of extra benefits that traditional ones do not,” she adds.

Here’s a look at the key features of Navy Federal’s credit card for bad credit:

  • Ability to upgrade credit limit or get an unsecured credit after three and six months of credit card review.
  • Low APR of 18%.
  • No annual fee.
  • Reporting to all three major credit bureaus- Experian, Equifax, and TransUnion, allows you to build good credit.
  • Free credit score monitoring so you can check your progress.
  • Collision damage waiver when you rent a car.
  • No reward limit.
  • Redeem rewards points for merchandise, cash, and gift cards.

You can also get a host of benefits that are included with all Navy Federal cards:

  • Access to your credit report
  • 24/7 access to member representatives
  • Fraud notifications
  • No foreign transaction or balance transfer fees
  • Zero liability for unauthorized transactions
  • Free and unfreeze your credit cards

Rates, Fees, and Rewards

The Navy Federal secured credit card doesn’t have a welcome offer. However, it comes with other rewards. You can earn unlimited rewards on purchases at the rate of 1x point for every dollar you spend. Redeem the points for merchandise, cash, gift cards, or a statement credit. You can also access special member deals at participating retailers.

The credit card comes with an 18% APR, which is quite competitive. The current average credit card interest rate is 24.56%, so you’ll be able to save a considerable amount of money on interest charges if you carry a balance.

There are no annual fees, cash advance fees, foreign transaction fees, or balance transfer fees.

What You Need to Apply

There are two main eligibility requirements you need to satisfy before you can apply for a Navy Federal secured credit card. The first is the membership requirement. You can only get a membership if you or a family member is a current or retired member of the military, a veteran, or a Department of Defense personnel.

If you’re already a member, you can apply for a credit card if you have at least $200 in your account as a deposit.

While the Navy Federal secured credit card offers a number of perks and low APR, it may not be right for everyone because of the low credit limit and the need for a deposit. Here’s what this card is best for.

Establishing Credit

If you’ve never borrowed a loan or used credit before, a secured credit card can help you start building a positive credit history. The Navy Federal secured credit card has more lenient approval requirements because it’s backed by a deposit.

You can establish a strong credit history by using the card for purchases and paying off your balance in full each month.

Rebuilding Credit

If your credit score has taken a hit in the past due to late payments, defaulting, or bankruptcy, you can rebuild your credit by using a secured credit card. As you make payments on time, your credit score will improve, and you may be able to qualify for unsecured credit cards.

New Credit Card Users

The Navy Federal secured credit card is also ideal for new credit card users. If you’ve never had a credit card before, you can use this secured card as a stepping-stone to getting approved for an unsecured card in just six months.

Once you’ve demonstrated that you can use credit responsibly, you can transition to a regular credit card and get your deposit back.

Here’s a step-by-step guide to applying for the Navy Federal secured credit card:

  • Start by pre-qualifying for the credit card before you submit the application. Prequalifying won’t affect your credit score.
  • Read through the Cardholder Resources on Navy Federal’s website for information on how to manage credit cards successfully.
  • Make sure you have the $200 minimum security deposit in your Navy Federal Savings account before you apply.
  • Click “Apply now” to fill out the form online and submit it.
  • Once your application is approved, you’ll receive your new credit card.

The Navy Federal secured credit card is a solid option for American military members who want to improve their credit profile. Other than the cash-back rewards, the card offers other perks like collision damage waiver and fraud notification that make it a good option.

If you’re qualified to join the credit union or are already a member, the nRewards card is worth considering due to its low APR and no annual fees.