Buy real chiles
Whole dried chiles and fresh ones, not powder from a jar. It's the cheapest upgrade in cooking and it's most of what separates professional food from home food.
Chile powder in a jar is chiles that were dried, ground, and then left on a shelf for a year in a container that lets light in. Everything that made them worth using has gone. What's left is heat and dust.
A whole dried ancho still has its oils. Toast it for thirty seconds and you can smell raisins and tobacco from across the kitchen. Blend it into a braise and you get sweetness, body and color that no powder produces. Same chile, same plant, completely different ingredient.
This is one of the things that separates professional food from home food, and unlike most of them it costs almost nothing to fix.
Five chiles worth having
You don't need a collection. Five covers nearly everything.
Ancho. Dried poblano. Sweet, raisiny, mild. The backbone of most red sauces and the one to buy first.
Guajillo. Bright, slightly tart, mild heat. Where the red color and the top notes come from.
Pasilla. Darker, more savory, faintly cocoa. Depth, underneath the other two.
Cascabel. Small and round, nutty, medium. The one that makes a sauce taste like it came from somewhere.
Árbol. Small, thin, genuinely hot. This is where heat comes from, and you control it by counting them.
Five chiles, five jobs. A jar of chili powder is all five blended into an average with the interesting parts removed.
Buy properly dried, and buy them somewhere that sells a lot
A good dried chile is pliable. Bend it and it flexes like leather. If it snaps, it's been on the shelf too long and it'll taste like paper.
Look for color too. A dried ancho should be deep and slightly glossy, not gray or dusty.
In Texas, Fiesta is where I buy them. Any Mexican grocery with turnover will do the same job, and turnover is the actual variable: the chiles are good because they don't sit.
If you don't have somewhere local, order them. They're light, they're cheap, they keep for a year in a sealed bag, and a single order covers a dozen cooks. Shipping in real chiles is one of the few places where mail order is obviously worth it.
Fresh chiles too
Same argument, shorter shelf life. A fresh serrano charred in a dry pan tastes of something; the same chile from a jar tastes of vinegar.
For fresh, the ones worth keeping around are serrano, jalapeño and poblano. Buy them firm and glossy, and use them inside a week.
How to use dried chiles
1. Stem and seed them. The seeds are bitter and they carry heat you can't control. 2. Toast them briefly. Dry pan, high heat, about thirty seconds a side, until they smell toasty and go pliable. This is where the flavor wakes up. 3. Watch them. The line between toasted and burnt is about fifteen seconds, and burnt chile is bitter all the way through whatever you put it in. 4. Steep them. Hot stock or water, simmer briefly, then covered off the heat for fifteen minutes until soft. 5. Blend them, with the steeping liquid. Keep that liquid; it's where half the flavor went.
Storing them
A sealed bag somewhere dark. They keep a year and they're best in the first few months. If a chile has gone brittle, it's still usable but it won't give you much; buy fresh ones and use the old ones for heat rather than for flavor.
The short version
A jar of chili powder costs about the same as a bag of whole dried chiles that will make ten times as much sauce and taste like something. There isn't a trade-off here. It's just a better ingredient, and most people have never tried it.