I use a 4gb microsd card.
I store all my ebooks on it. The advantage of this for me is if I have to restore to factory settings or whatever, I don;t have to reload the ebooks as they're on the MicroSD card.
I have about 250 ebooks on my Microsd card, which is a tiny fraction of it's capacity.
I'll probably not ever have much more than that on it as well, as I clear down stuff I know I'll never read again every now and then.
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