Best Practices suggest that reserves funds be segregated from operating funds in a separate, interest-bearing account. However, if segregating your reserves means that the association would end up paying monthly maintenance fees on their primary bank account (which usually kick in when the account falls below a minimum balance requirement), segregating reserves may not be in the association's best interests.
If your association is able to maintain minimum balances in the operating account and avoid monthly fees, an online savings account is often a good option for holding excess reserves funds. Interest rates are generally higher than those offered by a traditional bank, funds can be electronically transferred to external accounts as needed, and there are typically no minimum balance requirements. The most popular option for our clients currently is an ING Business Savings Account. (Note that most options will require evidence that your association is incorporated and In Good Standing.)