Martha Stewart Living, July 2002
Start by folding one-third of the towel over on itself.
Topstitch along the two sides. Fold the free flap down, and tuck it into the bag.
Cut two 12-inch lengths of colorful grosgrain ribbon. Fold one piece of ribbon in half lengthwise, and sew each of its ends to the top edge of one side of the tote bag to form a handle.
For reinforcement, sew the ends of the ribbon with a square containing an "X" of stitches. Fold the second piece of grosgrain ribbon in half lengthwise and attach it to the other side of the bag, as before, being careful to leave the flap free to open and close.
Colorful grosgrain ribbon
With very little alteration, you can turn one of your beach towels into a tote.