The two largest credit card networks, Visa and Master Card have agreed to pay its smaller rival, 'Discover' $2.75 billion to settle the antitrust suit brought on by Discover in 2004 claiming $6 billion in damages for preventing banks that issued Visa cards and MasterCards from also offering Discover cards.

Discover had filed its damages suit in October 2004 following the conclusion of the Department of Justice lawsuit, which determined that the rules of Visa and MasterCard barring banks from issuing cards on the Discover Network violated antitrust laws.

The US justice department had also sued the two credit card giants for antitrust violations and in 2001, when a US District Judge in Manhattan had ordered them to stop forcing banks to choose between their cards and those from Discover and American Express.

American Express also took recourse to courts and filed a suit against both the card companies in which Visa settled the suit by paying AmEx $2.25 billion and Master Card settled for $1.8 billion. In this settlement, both Visa and Master Card agreed to pay AmEx in incremental amounts over the course of a few years.

Both Visa and Master Card chose to settle the Discover suit on 14 October but the settlement amount was made public on Monday. However this settlement is subject to approval by Visa's former US member financial institutions.

Under the settlement, Visa will pay Discover $1.89 billion and MasterCard $862.5 million.

Visa had agreed with MasterCard earlier to pay the bigger share of any settlement, primarily based on relevant business volumes as Visa holds 51 per cent of the market share and Master Card 28 per cent. The US credit card purchases jumped to $2.17 trillion in 2007 from $426 billion in 1993.

Discover said it will receive about $862 million in the current quarter and as much as $472 million a quarter in 2009. The quarterly payments are contingent upon Discover achieving "certain performance levels in network sales volume," the company said.

"This settlement will enable Discover to further strengthen its capital base," Discover chief executive David Nelms said.

"Resolving this longstanding case on reasonable terms is in the best interest of Visa and our clients, cardholders and shareholders," said Visa chief executive Joseph W Saunders.

Without admitting his clients liability, MasterCard lawyer Noah J. Hanft, said, "We believe Discover's lack of success resulted from decisions that created a business model that is not attractive to bank issuers. We chose to settle to avoid the uncertainty and distraction of a jury trial.''

Visa had made a public issue in March 2008 where it sold 406 million shares at $44 per share, raising $17.9 billion in the largest initial public offering in the US history and had set aside $3 billion from the proceeds to cover some of its litigation expenses.

With the American Express and the Discover settlements, Visa is now paying out more than $4 billion.

Discover, was spun off from Morgan Stanley last year and had signed an agreement to pay Morgan Stanley the first $700 million of proceeds it receives from the settlement, and half of any proceeds it receives above $1.5 billion, with a maximum payment of $1.5 billion.