Huh? Merchants definitely are the ones who pay card processing fees.

Some small merchants offer cash discounts, but that's comparatively very rare.

Edit: since you mentioned Paypal, I agree that they're horrible to both merchants and consumers. Stay far away if you can. (In fact, I'm curious why you're using Paypal instead of someone friendlier like Stripe.)

In my experience merchants in Australia often add the fee directly at checkout. You can't really pass on the costs any more direct than that. They often do provide PayPal for checkout, which is why I expect people use it. Stripe is simply not present, so how could we use it?

I'm mostly speaking from the US perspective, where credit card surcharges are extremely rare for online transactions (and only slightly less rare for offline ones).

Stripe is meant as a suggestion for merchants, not customers.

The merchants pass on those costs in the form of higher prices. The better your rewards the more someone else is subsidizing your credit card fees, but you're not breaking even either.

Sure, in the same sense that merchants pass on all costs in the form of higher prices.

That being said, if you play it right you can actually make far more in rewards than the merchants paid. There's a whole subculture devoted to it: I routinely earn around 4-5% back, to the point that I prefer to pay my taxes via credit card even with the surcharge.

What a perverted system of middlemen who provide no value to the economy.

Yea! Except for providing seamless global payments, distributed credit provisioning, fraud protection, rewards, travel benefits, purchase insurance, what have credit cards ever done for the economy?!

I'm very sure it completely tickles down, although I have nothing to back that up.