McCarthy was linked with a move to Ajax last month before the club gave the coaching duties to former Mamelodi Sundowns goalkeeper Calvin Marlin, who is set to remain as head coach at Ikamva until the end of the season.
Bafana Bafana's all-time record scorer says he was not in a good frame of mind to return to the coaching seat with the Urban Warriors after parting ways with the Citizens last year.
"The wounds were still open, they were still fresh," McCarthy explained.
"I was battling in my head with questions that I said I wanted answers from the best coaches that have done it, so that I get peace on my mind.
"I think me taking the Ajax job, I would have taken it for the wrong reasons. I would have taken it to prove a point to my former bosses that they made a mistake or whatever. That's not the way. If you take a job, you must think it's the right project for you.
"If I can change the players' mindset, if I can make them better players, if I can help them win the GladAfrica league... that was none of the things I was feeling," he admitted.
"I would have taken the job for the wrong reasons and I don't want to stand in front of players when I am not there for the right reasons.
"It's not that I am desperate for a job, I need money. It's not about money. It must be right for the club and it must be right for me and my feelings."
McCarthy has since been appointed as an ambassador for the Nedbank Cup.