Heat a large pot or dutch oven over medium heat. Add bacon to the pot and cook until crispy, 10-15 minutes. Transfer to a paper towel to drain. When cool, crumble into small pieces.
Add onions to the pot with the bacon grease and cook until they soften, about 5 minutes, stirring occasionally.
Add potatoes, garlic, salt, and pepper to the pot. Cook for a few minutes, stirring frequently.
Add flour to the pot, and stir until the ingredients are well-mixed, a few minutes.
Add water and stir until well-mixed. Add milk and stir. Bring to a boil over high heat, and then reduce heat to medium-low to simmer until the potatoes are cooked, about 15 minutes, stirring occasionally to prevent potatoes from sticking to the pan's bottom.
Serve in bowls topped with crumbled bacon, shredded cheddar, and chopped chives.
Recipe printed from Savory Tooth at https://www.savorytooth.com/creamy-potato-soup-bacon-cheddar/