CDs are called Festgeld in German, dépôt à terme in French and deposito vincolato in Italian. The bank pays a higher rate than a standard savings account because it knows the money will not be withdrawn before maturity. The yield is fixed at the moment of deposit and does not change with the central bank's policy rate during the term — useful for protecting income but disadvantageous if rates subsequently rise.
Early withdrawal is usually possible but penalised, typically losing several months of accrued interest. CDs are covered by deposit insurance up to CHF 100,000 in Switzerland and EUR 100,000 in the EU, so they are a near-risk-free way to lock in yield. A common strategy is the 'CD ladder' — splitting capital across multiple maturities (1, 2, 3, 4 and 5 years) so one matures each year and can be reinvested at then-current rates.
Compare CDs primarily on net yield after withholding tax. Swiss CDs deduct 35% Verrechnungssteuer at source, which residents reclaim via the tax return; non-residents can reclaim some through double-tax treaties. Online banks like Cembra or Bank-now often beat incumbent retail banks on rates because their distribution costs are lower.
A retiree invests CHF 100,000 in a 3-year Cembra Festgeld at 1.85% fixed. Over three years she earns CHF 5,550 in gross interest; 35% withholding tax is deducted (CHF 1,943) and refunded after she files the tax return. Net effective yield: 1.85% pre-income-tax.