Melt butter in a 10" skillet or medium sauce pan over medium heat. Whisk in flour and cook until flour is lightly browned and fragrant; about 2 minutes. Whisk in milk and bring to a gentle boil, whisking often, until thickened; about 3-4 minutes.
Remove from heat and stir in freshly grated cheddar cheese and cream cheese until smooth and creamy. Then stir in diced jalapenos.
Garnish with jalapeno slices and serve immediately with tortillas chips, tacos or pretzels. Keep warm.