A merchant will not always be in a position to pass along that cost. They may have to accept a decrease in profit margin per customer in exchange for increased

A merchant will not always be in a position to pass along that cost. They may have to accept a decrease in profit margin per customer in exchange for increased business. They may also have to accept a decreased profit margin overall in exchange for staying in business, if all their competitors are accepting cards and they aren't. The only way what you say is universally true is if you hold that all costs of doing business are passed along to the customer "one way or another" which is sort of true but not a really useful way of thinking about it.