It's not a setting. It's mainly whether you're playing the game locally or on a server with the servervault setting turned on.
Playing the game locally, each time your character is saved (apart from when the entire game is saved), a new localvault copy is created. Playing on a server, the servervault character should be overwritten by the latest version of the character on each save.
If you use the "Save Character" option on the Options menu, that should save a local copy of your current character.
So far as I know, this behaviour is hard-coded and the only way you have to change it besides using Save Character is by changing the server settings (localvault vs servervault).
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Playing the game locally, each time your character is saved (apart from when the entire game is saved), a new localvault copy is created. Playing on a server, the servervault character should be overwritten by the latest version of the character on each save.
If you use the "Save Character" option on the Options menu, that should save a local copy of your current character.
So far as I know, this behaviour is hard-coded and the only way you have to change it besides using Save Character is by changing the server settings (localvault vs servervault).