Small towels have a terrible tendency to slip off the rod and pool on the bathroom or kitchen floor. An easy and inexpensive solution to this annoyance is the simple hair clip.
Clamp the clip on the towel and it'll stay put. The wide, round opening of these claw clips makes them perfect for the task (yes, even better than binder clips). They come in a range of sizes, widths, and colours, too.
I discovered this by accident when needing a place to put my daughter's hair clip (so I guess you could also say towel rods are the perfect holders for hair clips).