In a medium saucepan, heat over medium-low heat. Add the cream cheese and milk, stirring until the cream cheese melts and the mixture is smooth.
Gradually add the cheddar cheese, stirring constantly until fully melted and combined.
Stir in the diced tomatoes with green chilies, diced onion, garlic powder, cumin, chili powder, and salt. Mix well.
Continue cooking for an additional 5 minutes, stirring frequently until everything is heated through.
Remove the dip from heat and transfer it to a serving bowl. If desired, garnish with chopped cilantro.
Serve warm with tortilla chips or fresh veggies for dipping.
For extra heat, consider adding diced jalapeños to the dip.
If you prefer a smoother texture, you can blend the dip in a food processor after cooking.
This dip can be kept warm in a slow cooker on low for serving at parties.