You can have as many categories as you wish and only use the ones that pertain to that folder to mark items with categories. There is no need to have separate categories per folder type.

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Milly Staples [MVP - Outlook]
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After furious head scratching, Separate Catagories??? asked:
| Is there a way to separate catagories used for calendar and contacts?
| I don't want to use my calendar catagory names (holiday, events,
| business functions) for my contact catagories (family, friends,
| business). Please advise and thanks!!!