I think you overestimate how much an impact merchant fees have on rewards programs. Rewards programs are marketing, they exist to make people feel like they are

I think you overestimate how much an impact merchant fees have on rewards programs. Rewards programs are marketing, they exist to make people feel like they are getting something "back" on their purchases only to lose all of it the moment they are charged interest on their balance. Yes, there are people who pay in full every month and reap the rewards of the program - but don't kid yourself for a second thinking that's the majority of cardholders.