In the 1800s, around the time of the American Civil War, thrifty homemakers would use scraps of wool and felted pieces of wool from old clothing, blankets and hats to recreate rugs. Using money coins as a template, they would cut out circles and then stitch them together in blanket stitch fashion, hence the name "penny rug" formed. Sometimes, the mats or rugs were backed with old burlap bags or feed sacks, in some cases when the rugs would not lie flat they would stitch a penny inside the mat.
Penny rugs are made by selecting good quality wool and it must not be too thick. It may be hand-dyed or dyed by painting it onto the rug to give the piece another dimension. Circles can be cut from the wool in varying sizes and then stitched together concentrically using complementary colors.
Penny rugs were not actually made for the floor, but used as decorative coverings for beds, tables, dressers and mantle pieces. These decorative pieces were also used as wall hangings and pillows. Most designs included circles and some included animals such as cats, flowers, birds and star and heart shapes.