Reputations are a thing. In general, accepting surrender when you don't have specific reason not to is good policy (and usually is even when you do have specific reason not to). Same for treating prisoners well. A couple of reasons:

1) If it's known that you accept surrender and let folks live, folks are a lot more likely to try surrendering when the odds are no longer in their favor. This means they're not fighting as long, so you and yours take fewer hits. On the other end, if you're known for NOT taking prisoners (or for executing prisoners arbitrarily), then your opponents will always fight to the death, as once they've engaged it's victory or death - you've eliminated all other options.
2) People in general are more likely to accept surrender from folks who are known for accepting surrender. Unless you're so full of yourself that you think you'll always win (to be fair, in some games, that's a reasonably justified stance for PC's), it's better to have the option than not. If you never give quarter to those who ask, you can reasonably expect to never be given quarter yourself.
3) You're not the only person out there doing this sort of thing. Your actions will affect how folks see those who seem to be like you (even if it's just superficial appearances). This is part of why US soldiers are under standing orders to accept surrender and treat prisoners well, even when it's a significant hardship to do so: It's a practical matter. It's known US troops accept surrender and treat prisoners well, so a lot more opposing soldiers are likely to surrender, which means less fighting - and in turn, fewer US soldiers die as a result. Likewise, it's known that US troops accept surrender, so when US troops are sufficiently outgunned that they surrender, it's a lot more likely that their surrender will be accepted. Your convenience is not worth their lives.

For obvious reasons, this doesn't apply with Demons and the like, but for simple bandits? Absolutely. Surrender and live, all the way.