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They don't and it's a common misconception. Merchants need to stay competitive and they'll lose business by not keeping prices competitive. That's why spicy peanuts cost $.59 and only $.59 at every convenience store. The merchant fee isn't tagged on and you'll notice this on most products when you compare across stores.

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Not sure how that has anything to do with passing the cost onto the consumer. If, for instance, the processing fee increased to 10% across the board, you would see an increase in prices to cover that expense. It will certainly not be instantaneous and may not ultimately ever cover the full increase in cost, but Company's cannot make a profit without passing on their costs to the consumer.

Don't all convenience stores put up a small handwritten sign that says "Minimum Purchase Amount for Credit/Debit Transactions: $<whatever they need you to spend to offset the cost>

My understanding is that these signs are more "polite recommendations" than they are enforceable rules. My suspicion is that the card companies have a clause against this in the merchant agreement and don't want their payment method to be perceived as "costing more" to consumers.

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