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Is it ok to use WHM's automatic backup tool to backup all accounts to a subfolder inside the /home/ directory such as /home/backups/?

In the whm backup manager there's a big bold line saying "Setting this to /home is a very bad idea." :)

Main reason being obviously the /home/ partition has all the disk space allocation, we'd like to backup there and then run s3cmd once a day to copy the backups to Amazon S3. The Amazon S3 fuse script in case anyone knows about it doesn't work on our server for some reason, an s3cmd has never ever failed us on on any of our other servers :)