We have a "rag bag" by the laundry in the basement, full of cutup old socks, old towels, old flannel shirts, etc., which make great dusting and cleaning cloths. The rags get washed with the laundry after being used. They last a long time. If they get too stained, or we use them for something like paint cleanup, we just throw them out.
I've got two little boys, so sometimes stains won't come out, and a husband that sometimes gets grease on his shirt when working. I use these to cut rags. No one wants to wear them and they are perfect for cleaning.
I keep a small waste basket under sink with cut up pieces of cotton rags to use in place of paper towels, haven bought a paper towel in so long do not remember. Wash them alone if reusable using small load then throw over wire hangers in cellar to dry. Has saved a lot.
I would never cut up still usable clothing or linens that someone else could use. What is wrong with the Salvation Army or any charity to make some money from people's cast-offs? Isn't that the whole idea? They use the money to help people plus the people who come to the stores to buy items get them for a good price.
Over the weekend I sat for about an hour cutting up tons of old tshirts, soft shirts, an old terry cloth robe and everything I had pulled from my closet that I didn't either want or couldn't wear any longer. We like to use soft cloths on our motorcycles and trucks and the rags come in handy to dust with if they don't shed lint. I don't like giving my unwanted clothes to Good Will or the Salvation Army because they re-sell the items and no matter what anyone says, I believe they make a profit. Buying rags in a bag isn't cheap so I like to make my own!
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