Cheddar is a slur used to describe Hispanics in a derogatory way. Hispanics who are frequently in the welfare line getting "government cheese."
The word Cheddar is a racial slur that has been used historically to degrade and dehumanize hispanics. The word is still used by some people for this purpose, and it is seen as offensive and hurtful to hispanics. If you are unsure about whether or not it is appropriate to use the word Cheddar, it is best to err on the side of caution and avoid using it in any situation.