The former Liverpool center half believes the Blues need to stop stockpiling players.
Chelsea have more than 40 first team players on their books, when clubs must submit squads of 25 for the Premier League.
“Chelsea have just got to stop buying players, and players have got to stop signing for Chelsea,” Carragher said on Sky Sports.
“If I was a player, I would look at that Chelsea project, why would you sign?
“The only reason why you would sign is because someone might say, your agent might say, "we're getting a seven year deal on big money that's guaranteed money for seven years".
“You know what I'd say, back yourself as a player. Sign a four year deal at a proper club, and back yourself to do well, and then when you due for a renewal, your money goes up anyway. I don't understand why players are signing seven-year deals.”