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FAT 32, exFAT or NTFS format for USB flash drives ?

Large USB flash drives are becoming very popular as storage and backup media. With this, choosing the right file system when formatting your drive becomes very relevant, and below are the pros/cons to using the most common types.

FAT16 - an older format limited to 4GB size. It uses larger default cluster sizes (up to 32kb) compared to FAT32 (4kb) to increase speed but reduce efficiency. The boot sector is not backed up. The root folder can manage a maximum of 512 entries. Not recommended for newer/larger drives.

FAT32 - It is currently the default file system for USB drives and flash cards smaller than 32GB. Its only notable limitation is that any single file can't be larger than 4GB. In addition, Windows can't create FAT32 partitions over 32GB, but it can still read/write to them (Windows 98 could create up to 128GB FAT32 partitions). It is a choice by Microsoft to promote NTFS, which is generally more efficient when working with large partitions. There are third party tools that can create larger Fat32 partitions, most operating systems support partitions up to 2TB.

exFAT - Microsoft proprietary extension to FAT32 designed for flash drives, allows for files larger than 4GB, and much larger partition size than FAT32. Theoretically it has smaller footprint than NTFS, no journaling (can unplug device without losing data), and it can be read on OS X 10.6.5 (NTFS is read-only unless you modify the fstab). The only downside less compatibility than FAT32.

exFAT can be read on most newer OSes (Windows XP/2003 needs update KB955704, Windows Vista needs SP1). Most Linux/FreeBSD distributions can read/write using fuse-exfat (not as an official part of Linux because of the MS patents). OS X Snow Leopard in 10.6.5 and later supports exFAT. It has been adopted by the SD Card Association as the default file systems for SDXC cards larger than 32GB.

Note: Some backup software may have issues recognizing/reading/booting from exFAT flash drives when outside of Windows, so thorough testing should be performed to ensure compatibility.

NTFS - journaling file system with more disk writes, you should use "safely disconnect drive" instead of simply unplugging USB flash drives to make sure you do not corrupt any data. NTFS partitions mount as read-only in OS X (unless you modify the fstab). NTFS is not as flash media friendly as FAT32/exFAT because of journaling/extra disk writes. Still, it is a good choice if you are not concerned about the read-only Max OS-X limitation.

In conclusion, the most compatible and flash-media friendly format is FAT32. For large flash drives where files over 4GB are necessary, you should read the notes above carefully to weigh the pros and cons of exFAT vs. NTFS.

When formatting flash drives under Windows, most OSes will pickup allocation size of 4096, which is a good default for the majority of situations.
Windows cannot format partitions larger than 32GB in FAT32 (there are some third party tools that can)
To format using FAT32 on larger drives under Windows, you can use this simple tool: Fat32 Format GUI

See also:
Is GPT or MBR partition better?

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