Storing wiping rags in the kitchen

I've gotten the green bug lately, and am trying to convert my obsession with paper towels to something more responsible. When I cook, I am constantly grabbing a fresh paper towel to dry my hands on. (My husband uses the kitchen towels, unfortunately, for wiping down the countertops, mopping up spills.... and I never feel they get really clean.) So, recently I purchased a big quantity of inexpensive white terry towels, kind of like bar towels. I am planning on using those while cooking to dry my hands on.... at least I'm trying to convert my paper addiction! My question is, does anyone else use the bar towel approach, and if so, what/where do you store them in between laundering. I was thinking of using something like a diaper pail, but I don't want to have them start smelling, and I don't want to wash them in small loads (I probably won't mix them with my personal clothing.) Thought about baking soda, vinegar.... the usual.

Any ideas? I appreciate the input!

Sanna