4 Money Lessons from the California Fitness Closure in Singapore

Ryan Ong

Ryan Ong

Last updated 26 July, 2016

Customers lost thousands of dollars when California Fitness closed its branches in Singapore. Avoid making the same mistake by learning these money lessons.

California Fitness, once the icon of mega gyms in Singapore, closed all its branches last week. It left hundreds of angry customers in its wake, who now face the loss of several thousand dollars from expensive prepaid packages.

Could this have been prevented? We think so, and we’d like to help SingSaver.com.sg readers avoid similar predicaments:

Lesson 1: Limit the Amount Spent on Prepaid Packages

Several customers of California Fitness paid for training packages. Some purchased as many as 50 to 100 sessions in advance. There’s no real reason to do this.

Consider a more familiar business, such as music lessons (typically S$120 per hour). If you asked to purchase 100 sessions in advance for S$12,000, would you do it? Or how about subscribing to a magazine for five years at a time?

If you wouldn’t do it for other services, don’t do it for gyms or spas either. If you must buy a prepaid package, try to keep it to a reasonable size - perhaps a month or two in advance at most. There is no need to buy sessions to last an entire year.

Note that, as far as services go, we would advise you not to prepay at all if possible. It is always safest to pay for services after they are rendered. But if you trust the service provider, or they give you no alternative, then at least limit how much you buy in advance.

Lesson 2: Don’t Be Blinded By a Fancy Brand

Many Singaporeans who bought California Fitness packages assumed it was a reliable company that wouldn’t leave them in the lurch. What had them convinced?

Glitz and glamour, for the most part. California Fitness had high profile locations in places like Raffles and Bugis. They even had endorsements from Jackie Chan. This gave the impression that they are big, reputable company, which would fulfil its contract with clients.

Time and again, we’ve seen scams that use a nice front office to fool people. Even real Ponzi schemes, such as Sunshine Empire, used a facade of size and reliability.

The biggest lesson from this is to not judge a company by its brand and promises. Don’t assume that a bigger service provider is necessarily more reliable or stable.

See Also: 5 Red Flags of a Seminar Scam in Singapore

using a credit card

Lesson 3: Use Credit Card Instalment Plans for Items, Not Services

Many customers misunderstood how credit card instalment plans work. They were offered interest-free instalments on their package and assumed they would be charged for each separate instalment. That is incorrect.

Say you sign up for a S$5,000 gym package. The interest-free repayments are around S$417 per month for a year. When you charge this to your card, you are not charged only S$417. The entire S$5,000 is charged to your card at once.

Effectively, the bank pays the full sum for you first, and you later repay them in instalments.

So what does this mean?

It means that even if the gym shuts down, you still need to keep making repayments. The entire sum has already been paid by your bank. For the same reason, you cannot “block payments” to the gym - the gym has already been paid in full.

This is why you should restrict the use of credit card instalment plans to physical items like laptops or TVs. Avoid using instalment plans for prepaid services.

Do note that the full amount charged counts toward your credit ceiling.

Lesson 4: Don’t Expect to Recoup Your Losses if the Service Provider Shuts Down

If a service provider shuts down, it is highly improbable that you will get your money back.

Once bankruptcy is declared, the company is systematically liquidated. Major creditors like the landlord, or the company leasing them the gym equipment, are paid long before you. By the time it’s the customers’ turn, there may not be much money left.

You usually cannot recoup the money from the owners either. Without going into corporate law, suffice it to say that the company is considered a separate legal entity from its owners. The owners probably do not have to make good on the company’s losses.

Bear this risk in mind if you must sign up for a prepaid package.

Pro-tip: if you can comfortably pay for a package deal in full, use the right credit card so you can earn air miles and other rewards for your purchase. You can compare different credit cards at SingSaver.com.sg.

Read This Next:

4 Ways to Save Money on Fitness Classes

How Free Games Like Pokemon Go Make You Spend


Ryan has been writing about finance for the last 10 years. He also has his fingers in a lot of other pies, having written for publications such as Men’s Health, Her World, Esquire, and Yahoo! Finance.


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