Sorry pal, it will be hard to comment as a stranger to your data/situation.
Wanna be safe and make sure all your data is in iCloud, but risk duplicating your data on iCloud? Merge
Wanna keep all that info strictly on the device, and not move it to iCloud? Don't Merge
If it's just contacts, I will just log in to iCloud.com and manually enter them there and remove from the device...
The probable reason this happened is you logged in to iCloud on your device after you have entered all those information, or you forgot to log in first before saving those information thus giving you a prompt whether to merge or not merge the information stored in the iCloud with the local storage...
Hi, I did backup before merging, it's all good, except that the an email that's still under Draft is gone. How can I use Time Machine if that's possible, to bring back that draft?