You can make a wonderful rag holder out of an old t-shirt. Find a large or x-large t-shirt that you are no longer using. Put the t-shirt on a sturdy hanger, then tie off or sew the bottom of the t-shirt. Hang the t-shirt in a convenient place and use the neck hole to deposit and retrieve rags.
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This would also work for keeping your extra grocery bags in! Great idea.
That's cool! Would have NEVER thought of that one! Gonna try it!