Affirm Holdings Inc. (AFRM) had quite the Monday morning. Shares jumped at the opening bell before promptly giving back those gains, leaving investors to puzzle through what President Trump's latest credit card bombshell actually means for the buy now, pay later space.

A Weekend Threat That Shook Credit Markets

Over the weekend, President Donald Trump issued a stark warning to card issuers: cut interest rates to 10% by Jan. 20, or face treatment as being in "violation of the law" with "very severe" consequences coming their way. He called the industry's current 20% to 30% APRs outright abuse of consumers.

This wasn't policy talk or wishful thinking. This was an explicit legal threat. Major card and bank issuers saw their shares drop Monday morning, while investors initially piled into alternative consumer credit plays like Affirm, figuring they might be the winners if traditional credit cards suddenly face an existential pricing crisis.

How Affirm Actually Makes Money

Here's where things get interesting. Affirm runs a buy now, pay later platform that works nothing like your typical credit card. Instead of revolving balances with variable interest rates that compound indefinitely, Affirm offers installment loans approved right at checkout. You know exactly what you'll pay, when you'll pay it, and there are no late fees lurking around the corner.

The company has partnerships with major merchants across e-commerce, travel, and retail, embedding its checkout button both online and in physical stores. Revenue comes primarily from merchant discount fees and, for certain products, consumer interest income funded through bank partners and securitizations. Every transaction gets individually underwritten, and consumers get a fixed payment schedule rather than open-ended debt.

Why a Rate Cap Could Actually Help Affirm

If Trump's 10% APR cap becomes reality, the economics of traditional credit cards would take a serious hit. Legacy card issuers would likely slash their generous rewards programs, tighten lending standards dramatically, or pile on additional fees to compensate. All of this makes revolving credit less appealing and less accessible, particularly for younger consumers and those with less-than-perfect credit scores.

That's where Affirm's business model shines. Because the company charges merchants rather than depending entirely on high consumer APRs, it could remain economically viable in scenarios where capped credit cards struggle to make the math work. Merchants still need tools that drive conversion at checkout, and if traditional cards become less attractive or available, buy now, pay later options could grab significant market share.

Even if Trump's ultimatum gets softened or faces legal challenges, the political spotlight on credit card "affordability" and perceived consumer abuses strengthens the narrative that transparent, installment-based products represent a consumer-friendly alternative. That positions Affirm as a potential long-term beneficiary of any structural reset in how America prices consumer credit.

What Analysts Are Saying

Despite Monday's volatility, the analyst community remains generally positive on Affirm Holdings. TD Cowen and Truist Securities both maintain Buy ratings, though TD Cowen recently trimmed its price target to $110 from $115. RBC Capital kept its Sector Perform rating in place.

Wolfe Research recently initiated coverage with a Peer Perform rating, while Freedom Capital Markets came out with a Buy rating and $90 price target. Truist Securities and RBC Capital both revised their targets downward to $85 and $87, respectively, suggesting some caution around near-term execution even as the longer-term thesis stays intact.

Monday's Price Action

Affirm shares were down 6.87% at $76.18 by Monday afternoon, according to market data. The stock swung through a wide range during the session, trading between $75.25 and $84.65 as investors worked through the implications of Trump's threat and what it might mean for the competitive landscape in consumer credit.