He helped Birmingham reach the First Division play-offs in 1998–99, but lost out to Watford after a penalty shoot-out. They again reached the play-offs in 1999–2000, but McCarthy missed the semi-final defeat to Barnsley after breaking his leg. After his recovery he played in the 2001 League Cup Final defeat against Liverpool. Despite breaking his leg three times within five years as a Birmingham player, he made well over 100 appearances for the club.