If merchants pay more to take foreign cards, and I am racking up miles and points by using my foreign cards and pay no extra, I'd feel a little guilty.

But, since the networks are just Visa and MasterCard, I'd think merchants pay the same fee to take local cards, because the networks are the same. It makes more sense for Visa and MC to charge the merchant 3 pence for a 1 pound transaction on a UK card, and also charge the merchant the same 3 pence for a 1 pound transaction on a US card, because in the end the merchant gets 1 pound from the entwork, right? Also, the networks already charge the 1% foreign transaction fee. That should cover the cost of converting currencies, right?

If the merchants pay the same fee, but take rebate for DCC transactions (making money out of it), they should be guilty.

I am particularly confident on my above-mentioned idea when local network is also Visa or MC. It should be a different story if the local network is UnionPay (I'm pretty sure its fee percentage in China is lower than Visa and MC in US, about 1% vs 2.5% or 3%?), since merchants would be forced to pay more if foreign cards are taken without DCC.